Insurance in the realm of Islamic finance has long been a topic of discussion and contention. Islamic jurists have scrutinized the workings of conventional insurance and concluded that it does not align with Sharia principles. The primary reasons behind this conclusion revolve around two key concepts: al-gharar, or uncertainty, and the practice of charging interest.
One of the fundamental aspects that clash with Islamic principles in conventional insurance is the presence of al-gharar. This term refers to uncertainty or ambiguity in a contract, which can lead to one party exploiting the other. In the context of insurance, policies often involve uncertain outcomes, such as whether an insured event will occur or not. Islamic finance emphasizes transparency and fairness in transactions, which al-gharar goes against. Therefore, from a Sharia perspective, conventional insurance policies with their inherent uncertainties are deemed unacceptable.
Another critical factor contributing to the prohibition of conventional insurance in Islamic finance is the reliance on interest. In conventional insurance, the system is built upon the practice of charging interest on premiums and investments. Islam strictly prohibits usury or interest (riba), considering it exploitative and harmful to society. By participating in conventional insurance, individuals indirectly support this interest-based system, which goes against the principles of Islamic finance that promote ethical and fair financial dealings.
In summary, Islamic jurists find conventional insurance incompatible with Sharia principles primarily due to the presence of al-gharar, uncertainty in contracts, and the reliance on interest (riba). These elements contradict the core values of transparency, fairness, and ethical financial practices that Islam advocates for in its economic framework.
(Response: Islamic jurists conclude that conventional insurance is prohibited in Islam due to its reliance on interest (riba) and the presence of uncertainty (al-gharar) in contracts, which contradict Sharia principles.)