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Al-Dharā’i‘ and Maqāṣid al-Sharī‘ah: A case study of Islamic insurance

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Abstract

This paper aims at exploring the concept of al-dharā’i‘ in its broad meaning, both at the preventive and proactive levels (sadd and fatḥ al-dharā’i‘). The application of al-dharā’i‘ at both levels plays a significant role as a practical mechanism towards the realisation of maqāṣid, due to the cause-effect relationship between means and objectives. Thus, the legality or the Sharī‘ah value of an act could be determined based on its possible results in procuring benefits and/or preventing harm. Islamic Insurance has been considered a new development in fiqh al-mu‘āmalāt. The current debate is not on the question of legality of insurance as a concept and practice but rather to provide an Islamic model of insurance that conforms to the criteria of the Sharī‘ah that helps realise its objectives. Due to the unavailability of direct texts on this issue, some practical aspects of insurance depend largely upon the predominance of either beneficial or evil ends. This paper will, therefore, look into some controversial issues prevailing in insurance practice and an attempt will be made to review the issues within the framework of realisation of Maqāṣid al-Sharī‘ah via the application of dharā’i‘ both at preventive and proactive levels.
INTELLECTUAL DISCOURSE, 2010
VOL 18, NO 2, 261-281
Al-DharÉ’i‘ and MaqÉÎid al-SharÊ‘ah: A case
study of Islamic insurance
Akhtarzaite binti Abdulaziz*
*
Dr. Akhtarzaite binti Abdulaziz is Assistant Professor in the Department of
Fiqh and UsËl al-Fiqh, Kulliyyah of Islamic Revealed Knowledge and Human
Sciences, International Islamic University Malaysia. E-mail:
drzetty@yahoo.com
Abstract: This paper aims at exploring the concept of al-dharÉ’i‘ in its broad
meaning, both at the preventive and proactive levels (sadd and fatÍ al-
dharÉi‘). The application of al-dharÉ’i‘ at both levels plays a significant role
as a practical mechanism towards the realisation of maqÉÎid, due to the cause-
effect relationship between means and objectives. Thus, the legality or the
Sharʑah value of an act could be determined based on its possible results in
procuring benefits and/or preventing harm. Islamic Insurance has been
considered a new development in fiqh al-mu‘ÉmalÉt. The current debate is not
on the question of legality of insurance as a concept and practice but rather to
provide an Islamic model of insurance that conforms to the criteria of the
Sharʑah that helps realise its objectives. Due to the unavailability of direct
texts on this issue, some practical aspects of insurance depend largely upon
the predominance of either beneficial or evil ends. This paper will, therefore,
look into some controversial issues prevailing in insurance practice and an
attempt will be made to review the issues within the framework of realisation
of MaqÉÎid al-SharÊ‘ah via the application of dharÉ’i‘ both at preventive and
proactive levels.
Keywords: dharÉ’i‘, MaqÉÎid al-SharÊ‘ah, Takaful Model, Islamic insurance,
insurable interest
Abstrak: Makalah ini bertujuan meneroka konsep al-dharÉ’i‘ dalam erti kata
yang lebih meluas, baik di peringkat pencegahan dan proaktif (sadd dan fatÍ
al-dharÉ’i‘). Penggunaan al-dharÉ’i‘ di kedua-dua peringkat memainkan
peranan penting sebagai mekanisme yang praktikal dalam merealisasikan
maqÉÎid, berdasarkan hubungan sebab-akibat antara kaedah dan tujuan.
Dengan demikian, kesahan atau nilai sesuatu perbuatan daripada segi
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262 INTELLECTUAL DISCOURSE, VOL 18, NO 2, 2010
Sharʑah boleh ditentukan berdasarkan kemungkinan hasil-hasilnya dapat
memberi manfaat dan/atau menghalang bahaya. Insuran Islam dianggap
sebagai perkembangan baru dalam fiqh al-muÉmalÉt. Perdebatan masa kini,
bagaimanapun, bukan tertumpu kepada persoalan kesahan insuran sebagai
konsep dan amalan, tetapi untuk menyediakan satu model insuran Islam yang
menepati kriteria Sharʑah bagi membantu merealisasikan objektifnya. Oleh
kerana kekurangan teks langsung terhadap isu ini, beberapa aspek insuran
yang praktikal amat bergantung kepada pengutamaan penghasilan yang
memanfaatkan atau memudaratkan. Makalah ini akan melihat beberapa isu
kontroversi yang lazimnya wujud dalam amalan insuran, dan usaha akan
dilakukan untuk meninjau isu-isu dalam rangka merealisisasi MaqÉÎid al-
SharÊ‘ah melalui perlaksanaan dharÉ’i‘ di peringkat pencegahan dan
proaktif.
Kata kunci: dharÉ’i‘, MaqÉÎid al-SharÊ‘ah, Model Takaful, insuran
berasaskan Islam, faedah yang dijamin
Being a legal system based on God’s final Revelation to mankind,
Islamic Law or Sharʑah encompasses all aspects of human needs
and is suitable for application to all people under all circumstances
till the Day of Judgement. In some important respects, the textual
sources of the SharÊ‘ah (the Qur’
Én and Sunnah) provide only general
rules and universal principles, thus, allowing wide room for
intellectual investigation and consideration of the needs and
conditions of different locations and times in order to implement
those rules and principles. Accordingly, ijtihÉd has been defined as
the effort made by jurists in the quest for knowledge of the Sharʑah
legal rulings through interpretation. The classical jurists developed
a specific methodology consisting of methods, rules and technical
tools of interpretation and inference to deal with the textual sources
of the SharÊ‘ah. Known as uÎËl al-fiqh, this methodology serves the
purpose of systematic study and understanding of the texts and
proper derivation of legal rulings (aÍkÉm, sing. Íukm) from their
relevant proof. One of those methods and tools is the theory of Means
or Dharʑah. The jurists, however, disagreed on its reliability as a
source of legal rulings.
The meaning of dharʑah
The word dharʑah (pl. dhar
É’i‘) signifies the means or way of
obtaining an end or attaining a goal. There are two positions in
AL-MAQÓØID AL-SHARÔ‘AH AND ISLAMIC INSURANCE/AKHTARZAITE
263
defining the technical meaning of dharʑah as a source of derivation
of legal rulings:
1. The position of most classical jurists: They defined dharʑah in
a narrow sense to indicate those ways or means that are lawful
but could lead to prohibited ends or unlawful results. For
example, Ibn Rushd, the Grandfather, defined dhar
É’i‘ as being
“things which are apparently permissible but are used as a means
to something prohibited” (Ibn Rushd, n.d, vol.2, p.524).
According to Imam al-ShÉÏibÊ, the rule of dharÉ’i‘ is “to use a
benefit (maÎlaÍah) as an expedient to attain a harmful thing
(mafsadah)” (Al-ShÉÏibÊ, 1999, vol.2, p.556).
Thus, according to his view, the rule of dhar
É’i‘ means prohibiting
a lawful act owing to the possibility of its leading to an unlawful
result. It is important to mention here that not all lawful acts must be
forbidden on the ground of likelihood of harmfulness ensuing from
them. In this connection, the jurists divided lawful acts into three
categories:
a. Those that rarely lead to harmful results, like planting grapes
that could rarely lead to wine making.
b. Those that usually lead to harmful results, like the sale of
grapes to a winery and the sale of weapons to a known
criminal.
c. Those in which there are equal probabilities of harm and
benefit. For example, marrying a woman with the intention
to divorce her in order to enable her to remarry her former
husband.
The first type does not fall within the purview of the rule of dharÉ’i‘,
and an act that rarely leads to harmful results would not be prohibited.
The jurists disagreed regarding the remaining two categories.
According to MÉlikÊs and ×anbalÊs, they may be prohibited because
they could lead to harmful results. However, al-ShÉfi‘Ê rejected this
view, saying that what is permissible could not be prohibited on the
ground of the likelihood that it might lead to a harmful result.
2. The second position is to define dharÉ’i‘ in a wider and
broader sense, covering all means whether they lead to
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264 INTELLECTUAL DISCOURSE, VOL 18, NO 2, 2010
harmful or beneficial results. This means to prevent all means
leading to harmful consequences (and is known as sadd al-
dharÉ’i‘) or to open and encourage all possible means to
beneficial ends (which is known as fatÍ al-dharÉ’i‘). Some
classical jurists and the majority of contemporary scholars
take this position. It should be noted here that the classical
jurists agreed that beneficial acts must be encouraged, yet
they did not lay sufficient emphasis on this aspect in their
discussion on this issue. Rather, they mainly focused on sadd
al-dhar
É’i‘ or blocking the means. As the prevention of evil
assumed more prominence in their discussions, the other
part of the rule or doctrine of dharÉ’i‘, or the opening of the
means to beneficence (fatÍ al-dharÉ’i‘) did not receive equal
treatment from the jurists in their writings.
However, jurists like al-Im
Ém al-QarÉfÊ viewed dharÉ’i‘ in its broad
meaning mentioned earlier. Thus, he defined dharÉ’i‘ “as being all
means leading to specific ends.” To this definition he added: “It
should be noted that just as dhar
É’i‘ must be blocked (when they
lead to unlawful results), they also need to be opened, as they might
be required (wÉjib), repugnant (makrËh), recommended (mandËb),
or permissible (mubÉÍ). Likewise, dharÊ‘ah simply denotes the
means; hence, just the means to what is prohibited must be prohibited,
so too the means to what is obligatory must also be obligatory” (Al-
QarÉ
, 1993, p.448). This broad and comprehensive definition of
dhar
É’i‘ including the two aspects of both sadd al-dharÉ’i‘ and
fatÍ al-dharÉ’i‘ has been adopted by most contemporary jurists,
such as Muhammad AbË Zahrah, Wahbah al-ZuÍaylÊ, Abdullah al-
Juday, etc. (AbË Zahrah, n.d., p.228).
Dhar
É’i‘ and maqÉÎid: The cause-effect relationship
The idea or doctrine of Maq
ÉÎid al-SharÊ‘ah, or higher objectives
of Islamic Law, has gradually captured the attention of increasing
numbers of contemporary Muslim scholars who see in it a
springboard for solving contemporary issues. This idea provides a
guide and framework for the process of ijtihÉd in its endeavour to
guide and framework for the process of ijtihÉd in its endeavour to
solve issues creatively while complying with the will of the Lawgiver.
Thus, MaqÉÎid al-SharÊ‘ah as an independent discipline can be
AL-MAQÓØID AL-SHARÔ‘AH AND ISLAMIC INSURANCE/AKHTARZAITE
265
as a philosophy of law or a value system governing the Sharʑah
legal rules and reflecting the Islamic worldview in all its dimensions.
Ibn ‘ÓshËr defined MaqÉÎid al-SharÊ‘ah as “the deeper meanings
(ma‘ÉnÊ) and inner aspects of wisdom (Íikam) considered by the
Lawgiver (ShÉri‘) in all or most areas and circumstances of legislation
(aÍwÉl al-tashrÊ‘)” (Ibn ‘ÓshËr, 2006, p.67). He also explained the
importance of the knowledge of MaqÉÎid al-SharÊ‘ah for the
Mujtahids not only in understanding and interpreting the texts of
the Sharʑah but also to find solutions to the new problems facing
Muslims on which those texts are silent (Ibn ‘
ÓshËr, 2006, pp.5-
10).
Basically, the main objective of Sharʑah is to govern human
life and to protect the interests and benefits (maÎlaÍah) of people.
MaÎlaÍah in the Islamic context and perspective means what is good
and beneficial in the eye of Sharʑah. According to al-Ghaz
ÉlÊ, the
higher objectives of Islamic Law consist of two types:
1. Religious or spiritual (dÊnÊ) objective pertaining to the Hereafter:
This purpose, which revolves around the preservation and
promotion of religious faith (ÍifÐ al-dÊn), is the utmost and
ultimate purpose of the Sharʑah. In its aggressive or positive
aspect, the interest of religion is secured by facilitating ritual
worship of God and establishing the pillars of Islam such as
fasting, prayers, pilgrimage, and paying zak
Éh. In its defensive
aspect, jihÉd is stated as a means to defending dÊn, as it prevents
the established pillars of Islam from being undermined or
destroyed.
2. Worldly objectives (dunyawÊ) pertaining to mundane affairs
of this world: This type includes all worldly interests and
encompasses four major objectives. In accordance with their
importance and order of priority, these objectives consist of
the preservation and promotion of human life (ÍifÐ nafs),
intellect (ÍifÐ al-‘aql), progeny and offspring (ÍifÐ al-nasl),
and property (ÍifÐ al-m
Él). Upon close examination of the
Sharʑah rulings, one can safely conclude that they
individually and collectively point out to the realisation and
protection of all these interests. As an example of the
protection of human life, Islam has instituted a severe
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266 INTELLECTUAL DISCOURSE, VOL 18, NO 2, 2010
punishment for murder by imposing the death penalty. As
for the protection of progeny, it is realised through the
institution of marriage and healthy family life. Islam
encourages its followers to get married and have a family as
a means to ensuring a balanced upbringing and a good life
for the offspring, and preventing human beings from
committing such evil acts like adultery, fornication and
cohabitation.
Human interests in all spheres of life can be classified into three
levels according to their importance and impact on people’s lives
and existence. Each one having its proper function in human life,
these levels are strongly related to one another. The first and basic
level of human interests consists of the ÌarËriyy
Ét or necessities
(Al-ShÉÏibÊ, 1999, p.324). All the five objectives comprising the
preservation and promotion of the universals of dÊn, nafs, ‘aql, nasl
and mÉl belong to this fundamental level. They constitute
indispensable interests on which the life of human beings depends.
If these are violated or undermined, the whole of human life would
be subjected to corruption, disorder, injustice and, ultimately,
destruction.
The second level of interests, which comes next to the ÌarËriyy
Ét,
consists of the ÍÉjiyyÉt (Al-ShÉÏibÊ, 1999, p.326). These interests
include what is needed to alleviate hardship and to bring ease and
comfort in human life. Without them, people will suffer distress and
difficulty in their observance of the Sharʑah rules, though this is far
less than the harm resulting from the disorder and corruption affecting
the universals. This level includes all aspects of human affairs and applies
to all spheres of legislation, whether in ritual worship, customary and
daily life practices, contractual dealings or sanctioning and penalties.
In other words, the ÌarËriyyÉt serve to support and strengthen the
necessities. Life can still exist without this level of interest but human
beings will face difficulties and hardships in life. The provision to
break fast during the month of RamaÌÉn in the case of illness or a long
difficult journey reflects this clearly.
The third level of interests is known as taÍsÊniyyÉt or
complementarities. This level includes everything that promotes
human well-being and makes people’s life more comfortable (Al-
AL-MAQÓØID AL-SHARÔ‘AH AND ISLAMIC INSURANCE/AKHTARZAITE
267
ShÉÏibÊ, 1999, p.327). The taÍsÊniyyÉt are not indispensably needed
so that without them human life becomes deficient or the rules of
the Sharʑah inoperative. Their role is rather to improve and facilitate
the quality of life and make the observance of the law easier and
more comfortable. Ignoring this category is not detrimental to the
ÌarËriyyÉt or ÍÉjiyyÉt, although it relates to the same areas of Islamic
legislation. ShÉÏibÊ defined this level as adopting what conforms to
the best of customs and, thus, avoiding those manners that are
repulsive (unacceptable) to wiser people.
All these three levels are inter-related to each other. The first
level comprises the core and vital interests or ultimate objectives
whose realisation and preservation constitutes the main purpose of
the Sharʑah. The other two levels are subordinate to the first, and
serve the consolidation and advancement thereof.
As can be seen from the foregoing brief exposition, the theory
of maq
ÉÎid presents us with a comprehensive picture of the threefold
order of the objectives of the Sharʑah and a general philosophy
governing its rules and provisions. It, thus, provides a systematic
view of the human social order as envisioned by Islam, the scale of
values determining the priorities and preferences of Islamic Law
and the criteria for policy-making in society.
Accordingly, the notion of dhar
É’i‘ in its broad sense as explained
above is closely related to the theory of MaqÉÎid al-SharÊ‘ah, by
virtue of the cause-effect relationship between means and objectives.
Hence, the Lawgiver legalised certain acts or prohibited others on
the basis of the benefit or harm they could lead to. Any act or type
of conduct that is likely to result in something contrary to the
objectives of Sharʑah must, therefore, be prevented, even though
in itself, it is lawful in the first place. Similarly, any means that could
possibly lead to beneficence must be legalised and encouraged in
order to realise the maqÉÎid or objectives of the SharÊ‘ah, no matter
how inexplicitly mentioned in the texts.
Thus, allowing a clear measure of flexibility in Islamic Law, the
rule or theory of dhar
É’i‘ also conforms to the spirit of the SharÊ‘ah and
serves the purpose of realising its objectives. While the maq
ÉÎid or
objectives are eternal and unchangeable, the rule of dharÉ’i‘ is flexible
and its implementation might take different forms from one situation to
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268 INTELLECTUAL DISCOURSE, VOL 18, NO 2, 2010
another, as it is based on the judgement of the possible results of actions
leading to either evil or good. Likewise, sadd al- dhar’i‘ plays its role
as a defensive or preventive tool in order to safeguard the maqÉÎid by
actively blocking whatever means that could hinder the realisation of
legal purposes. On the other hand, fatÍ al-dharÉ’i‘ is also important to
proactively enhance the achievement of the lawful goals of Sharʑah
by positively legislating all possible lawful means in accordance with
the prevailing circumstances.
The next section of this article will examine the application of
the theory of dhar
É’i‘ in certain aspects of Islamic insurance. It is
important, therefore, to give a general description of MaqÉÎid al-
Sharʑah pertaining to wealth acquisition and property management.
This is because the application of dharÉ’i‘ in this field will totally
depend on the consideration of the higher objectives of the law in
this regard. A set of goals and objectives must be clearly defined
before it is possible to explore the means or ways to achieve those
goals.
Maq
ÉÎid al-SharÊ‘ah in wealth acquisition and management
Wealth is part of Allah’s bounty to His servants. Islam lays great
emphasis on the importance of wealth management and protection
to ensure that property is acquired and spent properly as allowed by
the SharÊ‘ah. Among many others, the following Qur’
Énic verse
provides proof of the positive attitude of Islam towards wealth: “Do
not hand over to those of weak understanding your properties which
Allah has made a mean of support for you” (4:5). This verse shows
how Islam acknowledges material wealth as a vital need of human
life. While commenting on this verse, ImÉm al-RÉzÊ stated: “(This
verse means) your life will not be established without such
properties” (Al-RÉzÊ, 1990, p.151).
As can be seen above, from their comprehensive analysis of the
Sharʑah legal rules based on induction (istiqr
É), the jurists inferred
and established five fundamental and vital needs of human life whose
protection is given utmost priority by the Sharʑah through its
different rules and forms of legislation. As already pointed out, those
needs revolve around religion, life, intellect, lineage and property
(al-Ghaz
ÉlÊ, 1997, vol.1, p.217). Thus, the protection of wealth or
property is part of the ultimate goals of the Sharʑah.
AL-MAQÓØID AL-SHARÔ‘AH AND ISLAMIC INSURANCE/AKHTARZAITE
269
In his book on MaqÉÎid al-SharÊ‘ah, Ibn ‘ÓshËr (2006, pp.279-
293) explained in some detail the Sharʑah objectives regarding
wealth and property. He identified five criteria that the Sharʑah
observes in this respect. These criteria constitute the goals of the
Sharʑah that have to be realised in wealth acquisition and
management. They consist of rawÉj (wide circulation of properties),
wuÌuÍ (transparency), ÍifÐ (protection), thabÉt (certainty) and ‘adl
(justice). Since the third goal (protection) may not be considered to
be something specific as it actually reproduces the general purpose
pertaining to the five fundamental universals (al-kulliyyÉt al-
ÌarËriyyah), only the other four goals, as explained by Ibn ‘ÓshËr,
will be discussed in the next section. However, it is important to add
another aspect to the protection and management of wealth and
property, namely, the purpose of takassub and istithmÉr (acquisition
and investment).
Raw
Éj or wide circulation of wealth
This goal means that wealth and property should be circulated among
the general public and actively transferred from one hand to another in
the form of expenditures and investments (Al-‘Ólim, 1991, p.497). For
this, the Sharʑah approves many forms of financial and economic
transactions such as contracts of sale, lease, partnerships and many
more in order to facilitate the proper circulation of wealth and transfer
of property ownership among the public. Thus, it is not allowed in the
sharÊ‘ah to purposely keep wealth in all its forms idle. Allah says: “And
for those hoarding gold and silver and do not spend them in the way of
Allah, announce unto them a most grievous penalty” (9:34). After
explaining the parties eligible to be given shares of fay’ and ghanÊmah,
the Qur’
Én states in another verse that the reason for the distribution is
to prevent limited circulation of wealth among the rich without allowing
the whole public to benefit from it.
1
WuÌËÍ or transparency
WuÌËÍ or transparency means that all financial transactions must be
conducted in such a manner that all parties are clear about all important
facts of the transactions, thus, avoiding all causes of disputes, clashes
or damages to any party (Al-‘Ólim, 1991, p.497). It is for this reason
that the Qur’
Én recommends Muslims to keep all future transactions in
record. Thus, Allah says: “O you who believe, when you deal with
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270 INTELLECTUAL DISCOURSE, VOL 18, NO 2, 2010
each other in transactions involving future obligations in a fixed period
of time, reduce them into writing” (2:282). The purpose of writing down
a debt transaction is to make all information regarding the transaction
clear and transparent in terms of subject matter, obligations and rights
of all parties, so that this will serve as a reference in cases of dispute.
This is particularly relevant to contemporary financial transactions that
are always in the form of formal contracts duly signed by the parties
concerned.
Thab
Ét or certainty
This purpose means that the rights of a party or parties to the
ownership of property must be certain and there should be no doubt
to those rights, unless there is certain public interest which could
prevent individual privilege (Al-HasanÊ, 1995, p.117). This implies
three elements: i) the right of individuals to ownership, ii) freedom
of disposal of property within the boundaries of the Sharʑah
requirements, and iii) guarantee of the privilege of ownership and
prevention of encroachment on a person’s rights without the owner’s
consent (Ibn ‘
ÓshËr, 2006, pp.291-292).
The Qur’
Én has explicitly guaranteed the right of ownership in
which respect Allah says: “O you who believe, do not take the
properties among you by illegal means unless by way of trade and
mutual consent” (4:29). This provides clear evidence that it is an
objective of the Sharʑah to guarantee the freedom of ownership
and there is no way that the right can be transferred to others unless
by contract of exchange or charity by the consent of the owner.
‘Adl or justice
Justice is both a general principle of the Sharʑah and one of its
higher objectives. Allah says: “Allah commands justice and good
deeds and liberality to the relatives and He forbids all shameful
deeds, injustice and rebellion” (16:90). Being one of the SharÊ‘ah
goals in financial transactions and dealings, justice means to put
wealth and property in its proper places, as commanded by the
Creator. This includes the right to acquire wealth, to discharge all
the duties related to wealth and to find the wisest way to spend or to
invest it (Al-‘Ólim, 1991, p.527).
AL-MAQÓØID AL-SHARÔ‘AH AND ISLAMIC INSURANCE/AKHTARZAITE
271
Takassub and istithmÉr or acquisition and investment
Takassub means to exert oneself to gain what would help to satisfy
one’s needs, whether by physical labour or mutual consent with
others (Ibn ‘
Óshur, 2006, p.276), whereas istithmÉr means the efforts
made to increase the value of the properties through lawful means
sanctioned by the Sharʑah (Sano, 2000, p.20). Thus, takassub means
to earn wealth and property, while isthtismÉr means to add value to
the existing wealth and property. These two aspects are strongly
related to the purpose of wealth and property management. To
achieve them, the Sharʑah has approved numerous types of contracts
and transactions. It is stated in the Qur’Én: “And when the prayer
has been performed, then you may disperse through the land and
seek for the bounty of Allah” (62:10). This underlines the obligation
on all Muslims to earn a living. In a ÍadÊth, the Prophet (SAW)
pointed out people’s duty to make efforts in order to enhance and
increase the value of wealth and property; “Whoever possesses a
piece of land must cultivate it or give it to another Muslim; if he
refuses, the land may be seized from him” (Al-BukhÉr
Ê, 2000, vol.
5, p.209).
The five things explained above constitute the main objectives
that should govern all financial transactions and economic dealings
in Islam. It should be emphasised here that the application of the
concept of dhar
É’i‘ in its broad meaning (both as sadd al-dharÉ’i‘
and fatÍ al-dharÉ’i‘) aims at preventing all means which run against
these five objectives and other established rules of the Sharʑah,
like ribÉ (usury or interest) and gharar (risk or uncertainty). Similarly,
it aims at encouraging and opening all means that could enhance
the realisation of these five objectives as far as they are lawful.
The next section deals with Islamic insurance or tak
Éful and an
attempt will be made towards applying the concept of dharÉ’i‘ in its
broad sense to some practical aspects of insurance.
Insurance in Islam: The Tak
Éful model
Insurance is one of the contemporary and recent developments in
financial and economic activities. Therefore, the classical jurists did
not discuss it. However, the philosophy behind the insurance industry
is not totally absent from the basic Islamic teachings. Generally,
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272 INTELLECTUAL DISCOURSE, VOL 18, NO 2, 2010
insurance policy is a contract of mutual financing in which one party
is expected to be protected materially against an unexpected loss by
the other party, in consideration of the payment of a particular amount
of premium (Ma‘sum, 2003, p.25). Insurance is, therefore, a contract
of exchange between two parties whereby the insured buys protection
from the insurer at a price (premium) against a prescribed risk.
Contemporary Muslim jurists have discussed the above model
of insurance in a series of discussions held since 1976. Most of
them are of the opinion that conventional insurance is not allowed
in Islam mainly because of the elements of rib
É and gharar. Below
are some conferences held to discuss this issue and the resolutions
they reached.
a. The First Conference on Islamic Economy, Mecca, 1976:
Conventional insurance as practiced today does not comply
with the spirit of Sharʑah and does not fulfill the requirements
which might render it permissible.
b. 10
th
Conference of Prominent Muslim Scholars, Saudi
Arabia, 1977: Confirmed by consensus of opinion that
conventional insurance in all its types is not permissible,
whether it is life insurance or general insurance (on property).
c. The Islamic Fiqh Academy, Jeddah, 1985: Confirmed that
conventional insurance is prohibited due to the uncertainties
(gharar). The committee suggested as an alternative an
insurance system based on cooperation and hibah (tak
Éful)
(Mahmood, 1991; Masum, 2003).
Thus, the alternative for conventional insurance is a model of mutual
insurance or known as tak
Éful.
2
Unlike in the case of conventional
insurance, tak
Éful or mutual insurance policy is not a contract of
exchange. Rather, it is a contract of mutual hibah or gratuity. In
Islamic Law, the elements of ribÉ and gharar are prohibited in
exchange contracts (‘uqËd mu‘ÉwaÌah) and not operative in a
contract of gratuity or hibah. In takÉful, the policyholders are both
the insurer and the insured as they collectively and mutually
guarantee each other against the stipulated risks.
AL-MAQÓØID AL-SHARÔ‘AH AND ISLAMIC INSURANCE/AKHTARZAITE
273
The relationship between the parties can be described as follows:
The relationship among the policyholders
All the policyholders are bound by the contract of partnership and
hibah. They jointly own the funds in accordance with their
contributions and undertake to mutually protect each other on the
basis of hibah.
The tak
Éful operator and the policyholders
The relationship can be viewed from two sides. Firstly, in its role as
manager of the hibah funds and insurance claims, the company
acts as an agent on behalf of the participants. Second, in its role as
manager of the investment of the total funds accumulated, the tak
Éful
operator may play the role of muÌrib or entrepreneur in a muÌÉrabah
contract or an agent with a fee. Thus, two models of takÉful come
into being: muÌÉrabah-based takÉful as practiced by Syarikat Takaful
Malaysia Berhad in Malaysia and takÉful based on wakÉlah or agency
as in TakÉful TaÉwunah, practiced by Bank al-Jazeerah in Saudi
Arabia.
Syarikat Takaful Malaysia Berhad: A mudharabah model
Syarikat Takaful Malaysia Berhad (STMB) is the first takÉful operator
in Malaysia to be incorporated on 20 November 1984. Being the
operator, STMB accepts payment of tak
Éful contributions (premiums)
known as the ra’s al-mÉl or the capital from the participants who are
as the rabb al-mÉl or the capital provider in a muÌÉarabah contract.
The ratio of profit-sharing among the parties shall be determined
upfront in the contract (BIRT, 1996, p.9).
STMB offers two types of tak
Éful schemes: The first is Family
TakÉful or Islamic Life Insurance. The second is general TakÉful or
the Insurance on properties in relation to material loss or damage
inflicted upon the property consequent upon a catastrophe or a
disaster (BIRT, 1996, p.69). Under the Family TakÉful, the instalments
of takÉful contributions paid by the participants are be divided and
credited by the company into two separate accounts:
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274 INTELLECTUAL DISCOURSE, VOL 18, NO 2, 2010
1. The Participants’ Account constituting most of the contributions.
2. The Participants’ Special Account constituting the tabarru‘
proportion. It is from this account that the company shall pay the
tak
Éful benefits to the heirs of the participants who die before the
maturity of the scheme (Ahmad, 1991, p.193).
Application of dhar
É’i‘ to some selected practical aspectsof takÉful
This section attempts to apply the principle of dhar
É’i‘ and to show
its role in the realization of MaqÉÎid al-SharÊ‘ah in some practical
aspects of tak
Éful as discussed above. The discussion will include
both sadd al-dharÉ’i‘ and fatÍ al-dharÉ’i‘.
Tak
Éful as a means to preventing ribÉ in insurance practices
The structure of tak
Éful based on mutual help and solidarity will
eliminate the ribÉ element in insurance. As is clear from the above,
takÉful is actually a hybrid of contracts of partnership and hibah.
The amount granted to a participant who encounters the risk insured
is a donation agreed upon upfront by all participants collectively.
Thus, it is not a consideration for the premium paid. Consequently,
there is no requirement of hand-to-hand and equal value exchange
as required for money for money exchange. Conventional insurance
is ribÉ-based, as it is a contract of exchange of money in the future
subject to the occurrence of the risks and at different value.
Tak
Éful as a means to prevent gharar-transaction in insurance
Gharar or risk and uncertainty is prohibited in Islamic financial
transactions. The existence of gharar may render a transaction
invalid for lack of information. Al-Qar
ÉfÊ stated that there are seven
aspects of gharar that can possibly affect transactions. They are
gharar in the existence of the subject matter of a contract, gharar in
the acquisition of the subject matter, gharar in genus, gharar in
type, gharar in amount and gharar in the identification of the subject
matter (Al-QarÉfÊ, 2001, vol. 3, p.1051).
Gharar in the conventional insurance practice may occur in at
least three of the seven categories listed by al-Qar
ÉfÊ. First is gharar
in existence, where the existence of the obligation of the insurance
company to pay for the claim is not certain as it depends on the
occurrence of the risk specified Second is gharar in acquisition,
AL-MAQÓØID AL-SHARÔ‘AH AND ISLAMIC INSURANCE/AKHTARZAITE
275
where the policyholder is not certain at the time of the contract
whether he will acquire the consideration for which he is paying the
premium as the consideration again depends upon the occurrence
of the insured risks. Third, gharar in amount is where both the
insurance company and the policyholders are not certain about the
amount of the premium that must be paid by the policyholders.
Tak
Éful or mutual insurance can eliminate the element of gharar
in insurance for two reasons: First, it is a gratuity contract (‘aqd
tabarru‘) and not an exchange (sale) contract in the opinion of the
MÉlikÊ jurists (Al-QarÉfÊ, 2001, vol. 3, p.284). However, according to
ShÉfi‘Ê jurists, there is no difference between the two types of contract
in the sense that both of them can be invalidated due to gharar.
Second, even according to ShÉfi‘Ê jurists, gharar can also exist in a
contract of tabarru‘. In the case of takÉful, the element of gharar
can be eliminated. Gharar in existence, acquisition and amount are
not present in takÉful, as the participants are certain that they will
acquire the takÉful benefits in proportion to their contribution plus
the surplus from hibah fund, if any.
Under the Family Tak
Éful scheme, it is agreed by the parties that
the takÉful benefits shall be paid to the participants or their heirs, in
the following manner:
1. If the participant dies before the maturity of the plan, the
heirs will be granted:
a. The total amount of tak
Éful instalments paid by the
deceased from the date of his first instalment up to
his death.
b. His share of the profits from the investment of his
paid contributions credited to his Participant’s
Account (PA) according to the muÌ
Érabah ratio.
c. The outstanding tak
Éful amount which would have
been paid by the deceased had he survived,
calculated from his death up to the maturity date.
This amount shall be recovered from the Participants’
Special Account fund or the Tabarru‘ fund (PSA)
(Ahmad, 1991, p.194).
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276 INTELLECTUAL DISCOURSE, VOL 18, NO 2, 2010
2. If the participant survives the maturity date, he will be given:
a. The total amount of tak
Éful instalment paid by the
participant during the tenure of his plan.
b. The share of the profits from the investment credited
into his PA.
c. The net surplus allocated to the participant.
Tak
Éful as a means to realise the five objectives pertaining to
wealth and property
As for fatÍ al-dhar
É’i‘, takÉful or insurance based on cooperation
and mutual help can undeniably provide an effective means towards
realisation of MaqÉÎid al-SharÊ‘ah in financial transactions and
wealth and property management. With a well-defined structure and
plan, all the five objectives of rawÉj (wide circulation of property),
wuÌËÍ (transparency), thabÉt (certainty), ‘adl (justice) and takassub
and istithmÉr (acquisition and investment) can be achieved.
As shown earlier, the threefold structure of the Family Tak
Éful
can be considered an effective means to realise the objectives of
rawÉj and takassub/istithmÉr, by saving regularly (via paying
specified instalments), investing these savings with a view to earning
profit in Sharʑah-compliant economic activities, and availing the cover
of the payment of takÉful benefits to the heirs and dependants in the
case of death before the maturity (Ahmad, 1991, p.192).
In the event a participant wants to surrender the policy or
discontinue the plan, he shall be entitled to the surrender benefit.
This benefit consists of the proportion of his tak
Éful instalments paid
and credited to his PA plus the profit from such installments. There
is no forfeiture in the Family TakÉful plan, as in conventional
insurance. However, he shall not be entitled to be refunded from the
PSA fund.
After the ‘aqd or the contract has been made by the “proposer”
(intended participant) and the tak
Éful company, all the important
clauses of the contract are recorded in the takÉful certificate (BIRT,
1996, p.53). Before the issuance of the certificate, the tak
Éful operator
will issue a cover note, especially in the case of General TakÉful. A
cover note is a temporary document for the participant to be used as
AL-MAQÓØID AL-SHARÔ‘AH AND ISLAMIC INSURANCE/AKHTARZAITE
277
proof to make a fair claim against the risk if it occurs before the
permanent takÉful certificate is issued (Masum, 2003, p.249). All
the above arrangements and stipulations are means to realise the
purpose of transparency, certainty and justice.
Tak
Éful and the concept of uberrimae fidei or utmost good faith
The concept of uberrimae fidei or agreement of utmost good faith
in insurance means that the parties to the policy or tak
Éful plan must
disclose the truth of the facts or the matters affecting the policy
(Ma‘sum, 2003, p.200). Under the law, it is assumed that insurance
contracts are entered into by all parties in good faith, meaning that
they have disclosed all relevant facts and intend to carry out their
obligations. Where lack of good faith can be proved, such as
fraudulent application to obtain insurance, the contract may be
nullified (Rubin, 2000, p.533). Under section 28 of the 1984 Takaful
Act, it is the participants’ duty to disclose in the proposal form fully
and faithfully all the facts which they know or ought to know,
otherwise the TakÉful Certificate issued may be void (BIRT, 1996,
p.74). As indemnity provided in takÉful contract is based on the
mutual responsibility of all participants, it is inherently a duty of
each of them to disclose all material facts affecting the contract in
order to achieve the objectives of transparency and justice. Failure
to disclose might render the possibility of benefiting from the tabarru‘
funds fraudulently at the expense of other participants.
Tak
Éful underwriting
Insurance underwriting is the process by which tak
Éful operators
consider and decide whether to accept participation of cover made by a
“proposer” and the terms to be imposed. It is the process of examining,
accepting or rejecting insurance risk and classifying those selected in
order to charge the proper premium for each. Generally, the purpose of
underwriting is to distribute the risk among a pool of insureds in a
manner that is equitable for the insureds and profitable for the insurer
(Rubin, 2000, p.536). The concept of underwriting is no less important
in takÉful, due to the solidarity and mutual assistance spirit inherent in
takÉful itself. Thus, the purpose of underwriting for Family TakÉful is to
maintain equity among the participants. In this case, each participant
contributes to a common fund (tabarru‘ fund) from which tak
Éful benefits
will be paid to any participant suffering from the risks defined. Therefore,
-
278 INTELLECTUAL DISCOURSE, VOL 18, NO 2, 2010
each participant should contribute according to the expected loss
probabilities that he might transfer to the fund. The takÉful company
should estimate the expected loss exposure presented to it by the
participant and charge a rate or percentage to be attributed to the tabarru
fund which is commensurate with that exposure (Ahmad, 1991, p.193).
In the case of STMB in its Family Tak
Éful scheme, the tabarru
proportion is worked out by the actuaries taking mortality by age
into account using the method and techniques of determination as
in the conventional insurance. The tabarru‘ proportion varies from
two percent to nine percent of the instalments to be credited into
PSA (Ahmad, 1991, p.194). Though it originates from conventional
insurance practice to ensure the insurance company’s adequacy to
compensate for the loss occurred, the process of underwriting can
also be applied in takÉful practice. TakÉful, being a mutual insurance
and mutual help in protection against loss, requires a reliable step in
determining the fund’s adequacy and capability in providing
protection against loss for all members. This in return is an effective
means towards the goals of transparency and justice, as the
underwriting process provides transparency in determining the
tabarru‘ portion and ensures that any participant will not take from
the fund more than what he deserves at the expense of other
participants.
Tak
Éful and the insurable interest
Insurable interest means the financial interest a person has in the
subject matter of the cover. For its validity, insurance requires that
the insured shall be so related to the subject matter of the insurance
that he will benefit from its survival or will suffer from loss or damage
to it or may incur liability in respect of it (BIRT, 1996, p.64). The
participant must stand in a relationship with the subject matter of
the tak
Éful whereby he benefits from its safety and well-being or
freedom from liability and would be prejudiced by its damage or
the existence of liability (BIRT, 1996, p.64). A policy without an
insurable interest is like a gambling contract that is clearly prohibited
in Islam, by which a participant hopes for a chance to gain instead
of providing a mutual cooperation for security against a risk
(Ma‘sum, 2003, p.156).
AL-MAQÓØID AL-SHARÔ‘AH AND ISLAMIC INSURANCE/AKHTARZAITE
279
However, under the 1984 Takaful Act, there was no expressed
condition for insurable interest for a takÉful plan. In the case of
Family TakÉful, whereby the insurable interest is the life itself, the
question of requirement for insurable interest might not arise, as the
participant in this case seeks to protect his and his family’s interest.
In takÉful, the insured are themselves the insurers, and thus the
element of gambling or the intentional self-inflicted harm will not
be operative for lack of insurable interest (Mahmood, 1991, p.293).
Above all, the insurance benefit in a takÉful policy shall be distributed
on the basis of the Islamic law of inheritance, as it is considered as
part of the participant’s legacy.
3
The nominees in the policy are
considered as mere trustees to administer the distribution of the tak
Éful
benefit after the participant’s death.
The stipulation to administer the insurance benefit in accordance
with the Islamic law of inheritance and will is no doubt on par with
the goal of thab
Ét or certainty of the deserving parties rights to the
inheritance as prescribed by the Qur’Én and Sunnah after one’s death.
Conclusion
The concept of dhar
É’i‘ should be understood in a broad meaning. In
the classical literature dealing with the concept of dharÉ’i‘, the jurists’
emphasis was more on blocking the means to evil things than on opening
the means to beneficence. Apart from that, opening the means to good
can also operate through the general principle of al-ibÉÍah al-aÎliyyah
established in Islamic Law, meaning that all material things and dealings
are originally permissible. However, the application of fatÍ al-dharÉ‘i‘
provides a more flexible and effective means to achieve the MaqÉÎid
al-Sharʑah by looking into the end result or consequences of an act or
rule.
Insurance as a new development in Islamic financial system and
wealth management is an example of issues that require the application
of the concept of dhar
É’i‘ in a broad sense with the ultimate view of
achieving the five objectives of the Sharʑah in wealth and property
management as discussed above. The foregoing discussion has tried to
show the relevance of the application of both sadd al-dharÉ’i‘ and fatÍ
al-dhar
É’i‘ in some practical aspects of insurance based on the takÉful
model as practiced by STMB.
-
280 INTELLECTUAL DISCOURSE, VOL 18, NO 2, 2010
Endnotes
1. It reads as follows: “In order that it may not (merely) make a circuit among
the wealthy among you” (al-
×ashr:7).
2. Takaful Act, 1984, Section 2 defined Takaful as: A scheme based on
brotherhood, solidarity and mutual assistance which provides for mutual
financial aids and assistance to the participants in case of need, whereby the
participants mutually agree to contribute for that purpose.
3. For a fatwÉ on this issue see Malaysian Law Journal (1974), 1.
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This case study is about a family that has a congenital heart disease son. The issues discussed in this story is the decision that the father has to make whether to migrate to US so that the insurance will cover for the medical expenses or to stay in Malaysia but takaful insurance will not cover for the medical expenses.
Article
More than 4200 clear informative definitions of key terms used in life, health, property, casualty, and other types of insurance. A quick-reference source for agents, brokers, actuaries, underwriters, personnel managers concerned with employee benefit programs, and consumers looking for easy-to-understand meanings of insurance terms 1 ejemplar pertenece al fondo donado por D. Ángel Linares Peña En la cub. : Barron's business guides
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