Insurance is not an acceptable practice to all Muslims - the conventional approach to insurance violates their religious beliefs. But bankers and insurance brokers came together recently in Abuja, Nigeria, to promote a type of insurance they hope will be acceptable to Muslims. Although the idea is not new, some Nigerian economists are pushing for it to be more widely embraced in order to help the country's economy.
Muslim scholars agree that the conventional concept of insurance is not Islamic. For example, western insurance companies often invest their clients' premiums in interest bearing bonds - a practice that violates the principles of Islam because interest, or riba, is forbidden.
Some religious scholars, like Mallam Muhammad Thani Haroun, say conventional insurance conflicts with other Islamic principles as well. "As far as Islam is concerned, Western insurance is prohibited in Islam because of the principle of Gadana, or predestination," he explained. "It me means that you do not have good trust in Allah."
Not all Muslim scholars agree. Many argue that insurance policies only seek to reduce the effects of God's will, not to prevent it. They compare insurance policies to lightning rods - or iron bars placed on top of a building to divert lightning from thunderstorms. The architect placing the bars does not intend to prevent the lightning strike, just save the building. They say an insurance policy on a home does not prevent a fire, but reduces the suffering of the family.
Many Muslim scholars argue that the idea of insurance has a basis in Islam. They say the Muslim holy book, the Qoran, and the traditions of the prophets urge Muslims to help one another in times of need, which is the idea behind insurance.
Dato Muhammad Fadzli Yusuf - an insurance agent in Malaysia - said the real problem with conventional insurance plans lies in the way they are implemented. "If we define insurance as a means of pooling resources to help the needy, it is very Islamic," he explained. "The problem is that present day insurance has become a commercial transaction based on the buy and sell contract, which does not conform with the buy and sell contract in Islam."
Making western insurance policies conform to Islamic injunctions requires several changes. Islam rejects certain aspects of the Western arrangement as being unfair or immoral. For example, a western company charges interest, invests clients' premiums in such ventures as interest-bearing bonds, and makes a profit that is not necessarily shared with its clients. Dato Muhammad Fadzli Yusuf says under the Islamic concept of insurance profit and losses are shared. "With Islamic insurance, it is not considered to be a buy and sell contract," he said, "but rather an investment program where participants agree to donate their money for the purpose of helping those in need who befall a catastrophe on loss."
In this cooperative arrangement, people working in the same type of business may establish a joint fund to which everyone contributes. The purpose of the fund is to compensate any one who suffers specific losses due to unforeseen circumstances, and there is no company that benefits from the profits. Instead, a fund may be established for a specific period of time. When the time lapses, the money left in the fund is given back to the members in the same percentage as their contributions.
Dr. Dato said another type of insurance is based on a profit and loss sharing formula called al-Mudharabah. He said it's been practiced in Malaysia for the last 17 years. "We have been approached by many parties outside to help them," he said. "In this respect, we have establishments in major companies in countries like Saudi Arabia, Sri Lanka. Many more others approached us to provide some form of technical help and advisory service."
The concept of al-Mudharabah is used in programs in which one partner gives another money to invest in some type of enterprise, including an insurance plan. Each person involved in the deal agrees at the beginning what proportion of the profit he or she will receive once the agreement ends.
Despite the growth of Islamic insurance in some Asian countries, it remains little known in Nigeria. Rotimi Fashola is an executive director of the Industrial and General Insurance Company Limited in Abuja. He said few Nigerians are insured "because a majority of Nigerians are Muslims and because they do not accept the concepts of conventional insurance. There is no way they would take life insurance".
Economists say insurance can help an individual - or a nation - face uncertainty at a small cost. For example, they say without insurance, a fire that destroys a factory could hinder the move toward industrialization.
Nigerian businessman Rotimi Fashola said it's important for more Nigerian Muslims to accept the concept of Islamic insurance, so the country's economy can move forward.