Is it permissible to have insurance, motor insurance and to work for an insurance company?

The Details of the Question

Is it a sin to work for an insurance company?

The Answer

Dear Brother / Sister,

Instead of saying yes or no abruptly, we think it is appropriate to know some issues.

If we have a look at the common insurance system in practice today before the fiqh aspect of the issue, we see that it essentially works as follows: Members register by paying a premium to the company with which they insure their belongings. If the property of the insured person undergoes an accident, the insurance company compensates the inflicted member by adding the premiums received from other members. If the members are not exposed to an accident, they cannot claim any rights due to the premiums they have deposited. Thus, all money collected from the members remains in the insurance company’s safe.

If we consider the issue from a religious point of view after this short explanation, we will see that there are some drawbacks. First of all, there is an undeserved gain and deception in the mentioned insurance: The person who is a member of the insurance company may incur a large amount of financial loss after paying installments for a few months, and may be exposed to a great financial loss or have an accident. In that case, the insurance company will pay the entire cost of the goods. Sometimes he pays premiums for years without being exposed to any disaster or misfortune. Thus, all premiums paid over the years will be obtained by the insurance company. The company gains unfairly. Our religion does not approve of such a gain. The following is stated in verse 29 of the chapter of an-Nisa:

“O ye who believe! Eat not up your property among yourselves in vanities: But let there be amongst you Traffic and trade by mutual good-will...”

Another aspect of the issue is whether such a transaction is regarded as trade according to Islamic law.

On the other hand, there are unknown elements in the contract with the insurance company. It is not clear when the person will have an accident and how long he will pay the premium. In fact, such a contract is not permissible. We learn that the Prophet (pbuh) did not approve a practice similar to it. The Messenger of Allah (pbuh) forbade selling the fruit on the tree until it ripened and when they asked, “What is ripening?”, he said:

“It is reddening and yellowing. If Allah does not give you fruit, how will you make your brothers’ money lawful for yourselves?”

The same thing holds true for insurance. In return for what will the insurance company receive the installments paid by the insured who does not have an accident?

Another reason why insurance is not permissible is related to interest. As it is known, interest is divided into two as riba al-fadl and riba an-nasiah. Riba al-fadl means exchanging measurable and weighable items with their own kind in advance, like exchanging one kilo of wheat for one and a half kilos of wheat on the spot.

Riba an-nasiah means selling one of two things of one kind in exchange for the other on loan. Or it means exchanging one of the two things that are the same in terms of being measured, weighed, cultivated or sold as a loan for the other. Such a sale is still not permissible even if the amounts are equal. For example, it is not permissible to sell two kilos of wheat for one kilo or three kilos of wheat on loan; similarly, it is not permissible to sell two kilos of wheat for one or two or three kilos of barley on loan.

If the insurance company pays the participant more than the premium paid by him after a disaster, it will be riba al-fadl; when it pays after a while, it will be riba an-nasiah

Insurance also includes gambling or suspicion of gambling. It resembles a kind of lottery. Thousands of people buy tickets in the lottery, and most of them get nothing. However, some participants get a certain amount of money or things. While the great majority loses, a few people win. Insurance is similar. While a member who has an accident gets many times more than the money he has deposited, some of the money deposited by many members who have paid installments for years is given to the one who has an accident and the rest is left to the company. As in the lottery, there are losers and winners in insurance.

Because of all these drawbacks, it turns out that the form of insurance based on premiums in our time is not legitimate.

However, retirement insurance is not like that. The state can give salaries to those who are employed in civil service or any other job, as well as to those whom it does not employ for some reasons. Moreover, if the person dies, the money deducted for the pension insurance is not transferred to the state. The wife or children of the person continue to receive a salary.

There is also a form of insurance based on exchange, which is completely mutual assistance. This insurance is established with the money paid by people who may face the same danger. If any of the members undergoes a misfortune, the loss of the member is compensated from the money that has been collected. If the previously collected money is not enough to pay the loss, the members are requested to pay again. If some money is left after the damage is paid, it is either returned to the members or kept as a reserve for future misfortunes. If the accumulated money is invested, the profit is distributed to the members. It is possible to establish such cooperation and solidarity. As a matter of fact, in some Islamic countries, there are insurance companies based on the exchange principle under the administration of Islamic banks.

(see Mehmed PAKSU, Helal-Haram, Nesil Yayınları, December 1998, p. 39-42)

Editor’s Note: The form mentioned at the end of the answer is currently applied in Turkey as well. Some insurance companies were established based on mutual assistance. It is necessary to ask based on what system they work. In that case, it is permissible to start and operate such an insurance agency and its earnings are halal. In other words, it is permissible to work in a legitimate insurance company, but not in others.

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