Develop a classification of sharia Insurance products with actual products examples

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ACKNOWLEDGEMENT

I would take this opportunity to thank my research supervisor, family and friends for their support and guidance without which this research would not have been possible.

Develop a classification of sharia Insurance products with actual products examples

Source: Shafiel, A. (2010), Riba Free Models of Money, Banking and Insurance Components of the Islamic Moral Economy

Tabarru

The collections of donations in the Takaful fund are calculated at a year-end period, where all assets and liabilities are accounted for and valued at market prices. Based on this final accounting valuation, the takaful operator determines if the fund had a surplus, deficit, or balance. Similarly, the takaful operator is responsible for calculating the surplus or deficit by subtracting total insurance claims from the total participant Tabarru collected for the same period, less any fees owed to the operator. The operator of the Takaful may also determine that reserves are necessary, and may allocate additional reserve capital for the upcoming year.

All distributions of surplus capital, if any, are derived from the shareholder fund and they are distributed only after all expenses of the fund have been met. Then, the shareholder fund might not be responsible for insurance claim payouts exceeding the aggregate shareholder capital. In this case, the participants of the takaful policy must contribute additional capital to bridge the deficit.

Moreover, there are three primary methods of distribution of surplus amount in the takaful fund. In the first method, the surplus amount is distributed to all participants in proportion to their payment in the tabarru; if a participant is the recipient of an insurance claim, then he/she is ineligible to receive any surplus distribution.

Instead, the Islamic models operate under a moral and ethical framework, and they have an additional responsibility of promoting social equality, as determined by Islamic doctrine. As such, takaful policies are required to pay zakat to the poor and needy people in the society (i.e. make charity).

Accordingly, many jurists perceive life insurance as an illegal thing like making a prediction about the life of a person, which is illegal in Islam.

Life Insurance

While many Muslim scholars take issue with the fact that insurance may deal with speculation, other such as Dr. Muzammil Siddiqi, Chairman of the Fiqh Council of North America says, "I do not believe [capitalist insurance] is gambling because the purpose of gambling is to hope you'll win. The person who gets insurance is doing it to avoid risk.” In this way, Dr. Muzammil Siddiqi had made a statement that insurance is like mitigating the effects of any possible risk in the future. (Al-Hallaq, 2002)."

Although, capitalist life insurance is certainly considered impermissible in Islam; especially, if the insurance utilizes riba-based financial instruments or payout sums exceeding the policy premiums. Therefore, the element of maysir or gambling is becoming less of an issue in takaful insurance policies. This is further illustrated in takaful models where riba is absent, and the insurance function is more socially ...