Does Insurance Violate Sharia Principles? An Analysis of Long-Term Care Insurance
The question of whether long-term care insurance aligns with Sharia principles has been a subject of intense debate among Islamic scholars and advocates alike. In this article, we delve into the core arguments put forth by those who argue that insurance fundamentally violates the principles outlined in Sharia, with a particular focus on the concept of 'riba' or interest, and its categorization as gambling or speculation.
Understanding the Sharia Concept of Riba
The prohibition of 'riba' (interest) in Islamic finance is deeply rooted in the Quran and Hadith, with numerous verses explicitly forbidding this practice. For instance, Surah Al-Adh-Dhariyat (51:39-40) mentions that consuming interest is likened to the eating of the flesh of a dead animal, which is forbidden and an act of transgression.
Commercial insurance, particularly long-term care insurance, is often scrutinized through the lens of Sharia as it involves several elements that align with the principles categorically prohibited by Sharia. The primary concerns revolve around the delayed payment of money and the associated risks and profits, both of which may be construed as forms of 'riba al-fadl' and 'riba al-nas'.
Insurance as Gambling
One of the key arguments against insurance is its classification as a form of gambling. This critique is based on the Quranic verse:
“O you who believe! Intoxicants (all kinds of alcoholic drinks), gambling, sacrifice of Al- Anaha (idols, atools, etc., of puta stones, etc.) and Al-Azlaam (play of arrows) are an abomination of Shaitan’s (Satan’s) handiwork. So abstain (from these things) that you may be successful” (Al-Maa'idah, 5:90)
The financial transactions entailed in insurance contracts often involve a degree of uncertainty which, from an Islamic perspective, mirrors the speculative behavior characteristic of gambling. The insurance company collects premiums and promises to pay out in the event of a specified loss, making it essentially a transaction of chances.
Uncertainty and Forbidden Transactions
Another critical point in the analysis of insurance is the principle of uncertainty, or 'gharar', which is inherently prohibitive according to Sharia. This concept is derived from a Hadith mentioning the prohibition of certain trades involving uncertainty:
“The Messenger of Allah, peace and blessings be upon him, prohibited transactions by meaning and transaction by signs” (Muslim)
This principle is not limited to gambling but extends to any transactions where one party is uncertain about the outcome. Insurance contracts are characterized by considerable uncertainty regarding when claims will be made and the extent of the suffering or losses.
Unjust Consumption of Wealth
Insurance is also accused of consuming wealth unjustly, which is strictly prohibited according to the Quran. Surah An-Nisa (4:29) states:
“O you who believe! Eat not out of that which is unclean, which is unlawful, nor (take) by false pretences: that which you have alloted to someone else; and know that out of all things Vehhallaah hath appointed His portion unto every one of you: At last unto Him Vehheno your return and He will let you know (What belongs to each).” (Surah An-Nisa, 4:29)
Islamic finance emphasizes the accountability of wealth and the importance of righteous and just transactions. Insurance companies often make substantial profits from premiums paid, sometimes offering limited returns on premiums. This profit mechanism, coupled with the potential for the company to tokenize risk, is seen as a form of unjust wealth consumption...