Dr.Monzer Kahf, a prominent economist and counsellor states: “This issue is better tackled in detail as follows:
- Whenever an insurance contract is required by law, it is permissible to take with no disagreement between all scholars. This clearly applies to car insurance as you mentioned.
- We must realize that insurance contract is a new approach that did not exist in the past of the Muslim society. Therefore, you may not expect any statement about it in the Qur’an, Sunnah or classical Fiqh. Shari’ah scholars and experts studied this contract since it became known in the Muslim countries over the past one hundred and fifty years. Some of them approve of it and others don’t.
- The view against it is founded on the following: it amounts to interest because you pay money and you get money; it is a form of gambling; and it contains a great deal of Gharar (ambiguity-cum-uncertainly).
- The fact is: it is not interest because it is not money for future money, it is rather money (the premium) for security (that if any thing happens … the company takes charges of most of the loss or gives a sum, in life insurance, to help relieve the circumstances); some insurance contracts may include interest conditions. It is not gambling because gambling is betting on pure unrelated matter such as throwing a dice and transferring funds from one hand to another because of what comes, in insurance there is no betting as it is founded on statistics and the probability theory that only applies to large numbers. The Gharar is of course there because of the un-knowability of time of frequency and amount of obligations of the two parties.
- The suggested solution is to create insurance providers that are not commercial companies. Hence, the idea of co-operative companies that is called Takaful came and also to found the contract as membership fees instead of premiums that represent a price paid by the insured.
- The view for insurance contract is essentially as follows: It is a new contract that is beneficial, it is necessary in many circumstances of modern life, it does not violate any principle of Shari’ah, the Gharar that is in it is tolerable according to the Shari’ah rules (that in a necessary contract one overlooks the Gharar) and it is also contained by the fact that insurance only works for large numbers not for one insured alone. However if the insurance contract is permissible there must be conditions that may make it Haram for other reasons besides the contractual relationship itself. Hence, if an insurance contract is based on interest (as the case of whole life insurance contract) or if the object of insurance is prohibited (such as insuring a shipment of liquor) contracting insurance with any of these two matters becomes prohibited.
I tend to agree with the second view and argue that insurance, including life insurance has become almost an important necessity of our lives today. We still have to avoid any interest clause in its contract. Of course if a Takaful cooperative exist we better go for it, for instance it allows to accommodate all views and it also gives us the additional advantage of investing its money (reserves and other funds) in accordance with Shari’ah.”