Transcription
In the name of Allah, the Most Gracious, the Most Merciful. Praise be to Allah, Lord of the Worlds, and may Allah's peace and blessings be upon our Prophet Muhammad, his family, and all his companions.
Brothers and sisters, peace, mercy, and blessings of Allah be upon you. Welcome to a new episode of your program, "Halal Money," in which we review issues from the Book of Sales from the book "Umdat al-Fiqh" by Imam Ibn Qudamah al-Maqdisi, may Allah have mercy on him. In my name and on your behalf, I welcome His Eminence Professor Dr. Yusuf bin Abdullah Al-Shubaili, Professor of Fiqh at the Higher Institute of the Judiciary. Welcome, Your Eminence Sheikh. Welcome to all brothers and sisters, viewers, and I ask Allah, by His grace and bounty, to show us the truth as truth and grant us to follow it, and to show us falsehood as falsehood and grant us to shun it, and to guide us to the straight path. O Allah, Amen.
Brothers, to learn about the topic of this episode, let us go to this report, then we will return.
Insurance and commercial competitions. Insurance is a contract between two parties, one called the insurer, which is usually a joint-stock insurance company, and the second is the insured. The insurance company commits to paying the insured financial compensation in the event of an accident or the occurrence of a risk specified in the contract, in exchange for material premiums paid by the insured to the insurance company. Insurance, in its true, customary meaning, is a contract of recent origin. The first type of insurance to appear was marine insurance, which was in the 14th century AD in Italy, where some people undertook to bear all maritime risks to which ships or their cargo were exposed in return for a certain amount. Then came fire insurance, then life insurance, and then insurance spread and diversified until it encompassed all aspects of life. Insurance companies began to insure individuals against every risk they were exposed to in their persons, wealth, and responsibilities. Some governments even compel their citizens to take out certain types of insurance.
Welcome back, brothers and sisters. Your Eminence Sheikh, insurance. Yes, it is a long and thorny topic, one of the difficult subjects on which many scientific theses have been written, and it is the subject of our episode today.
In the name of Allah, the Most Gracious, the Most Merciful. Why do we talk about insurance? The truth is, talking about insurance is an extension of our discussion in the previous episode about sales involving gharar (uncertainty). Yes. Because insurance has a strong connection to gharar, which the Sharia came to prohibit. Correct. And before we explain this connection between insurance and gharar, we want to introduce this contract, insurance. What is it? Yes. Insurance is an agreement between a person and a company, whereby this person pays premiums or subscriptions to the insurance company. And the insurance company commits to compensation upon the occurrence of harm to that person. So, here we notice the relationship between two parties. This person who is exposed to risks and pays this subscription is called the insured or the policyholder. Correct. And the insurance company is called the insurer, and the insured thing, this risk, is called the insured. Yes. So, the insurance contract is based on a type of commitment from the insurance company to bear the risk or pay compensation upon the occurrence of harm, but in return, it takes a subscription. Yes. From the policyholder or the insured. And the gharar in it is clear because the risk may or may not occur. And from here came the connection between the insurance contract and gharar. Because this risk, first, is uncertain. Correct. Neither the insurance company nor the participating person is certain that this risk will occur. Second, if this risk occurs, what is its cost? Correct. What is its amount? This, no one can determine. Therefore, this contract, the insurance contract, is considered a type of gharar contract, or gharar enters into the insurance contract.
The insurance contract has multiple examples. For instance, the insured risk could be car accidents. Yes. For example, we insure with the insurance company against accidents that happen to the car. It could be health insurance. Yes. That a person insures with the insurance company in exchange for medical treatment. It could be insurance against fire and drowning, for example, for goods being transported by ship, so they are insured against drowning. Yes. It could be insurance against damage, that the goods are damaged, and the insurance company compensates me upon the occurrence of this damage. But before this, Sheikh, I believe insurance was not known in the past. So, when did the term insurance emerge? In reality, the insurance contract is not an old contract. It appeared in later eras, and some specify it around the eighteenth century AD. It first appeared in Europe, in Italy, and there were people who specialized in compensating or insuring against maritime risks. This was the first type of insurance to appear, which is marine insurance. Yes. Because maritime goods are exposed to more risks, such as drowning, piracy, and damage due to long distances, and so on. So, there were people who specialized in marine insurance. They would pay them an amount, and they would commit to compensation in case the ship sank or the goods were damaged, or otherwise. Then the types of insurance diversified until now, companies invent insurance every day, not every year, against, for example, a profession, against theft, insurance for an employee, insurance for investments, for profits, for losses. Anything that can be a subject of risk, insurance companies have started to appear. So, it is a new contract, considered one of the new contracts.
The subject of the insurance contract varies according to the insured item, as we mentioned. It could be health insurance. Yes. Against, for example, health risks. It could be liability insurance, or what is called "liability." What does "against liability" mean? It means the damages that a person inflicts on others, like traffic accidents. For example, car insurance. Car insurance is of two types. There is liability insurance, meaning if a person causes an accident, the insurance company repairs the damage that befell others due to that person. And there is comprehensive insurance. Comprehensive insurance repairs even the person's vehicle if it suffers damage. It is known that in most countries, third-party insurance is mandatory. They say a car cannot be driven on the road unless it is insured against third parties, so that if it causes damage to others, the insurance company bears this damage. And comprehensive insurance is optional, not mandatory, for whoever wishes to insure their vehicle comprehensively. Otherwise, they are only obligated to insure against third parties, as is the case now. As is the case now in the Kingdom and other countries. Health insurance is mandatory in some countries, and in some countries, the government undertakes health insurance. In some countries, as is the case in the Kingdom, it is not mandatory, but the state provides healthcare through government hospitals, which are affiliated with the state and provide health services from the state. So, insurance has many types, depending on the subject of the risk being insured against. Yes.
This diversification of insurance is in terms of its subject matter, but we can look at insurance from another angle, the nature of the contract, the contractual relationship between the insured, or the policyholder, and the insurer, which is the insurance company. There are only two types of insurance contracts. Yes. In terms of form, there is commercial insurance and cooperative insurance. Commercial insurance and cooperative insurance. Commercial insurance is what we talked about a little while ago, which is that one pays to the insurance company in return for the insurance company committing to something, to compensation. This is a contract based on risk, gambling, and gharar. Yes. Because the subject of the contract is that the insurance company pays compensation. Correct. So, what is the amount of compensation? It is not specified. Whether the risk will occur or not, no one knows. Therefore, it is based on some risk. That is why contemporary Fiqh academies have issued rulings prohibiting commercial insurance. Yes. The Islamic Fiqh Academy affiliated with the Muslim World League, the International Islamic Fiqh Academy, the Council of Senior Scholars in the Kingdom, the Accounting and Auditing Organization for Islamic Financial Institutions – all have issued rulings prohibiting commercial insurance. Why? For the reason we discussed in a previous meeting: gharar, because the contract's outcome is unknown. Therefore, the insurance company enters into a risk in this. Even the person, I might pay premiums to the insurance company. Correct. I pay them, for example, 600 riyals per year for car insurance, and the whole year passes without any damage occurring. Correct. In reality, I have become a winner and the company has won. And I might pay 600 riyals to the company, and the compensation is, for example, 3,000 riyals. This means the company is a loser, and I am a winner. So, it is a contract oscillating between winning and losing. This is the reality of the ruling. Therefore, rulings have come to prohibit it.
The second type is cooperative insurance. Yes. Cooperative insurance. Before we define cooperative insurance, we conducted a good survey, in fact, with a group of brothers about the difference between commercial insurance and cooperative insurance. Good. Perhaps we can see the result of this survey. Brothers, let's go to this survey, then we will return. Is there a difference between cooperative insurance, which is for cars, medical insurance, and commercial insurance, which is for markets, for complexes, for commercial items? I don't have much background, but I think cooperative insurance benefits the community as a whole, while commercial insurance is for a person who has a commercial establishment and insures it against damages, etc. Commercial insurance is for cars, like cars, like goods, like equipment, etc. As for cooperative, for example, health insurance. Cooperative insurance is what the Council of Senior Scholars issued a fatwa on a few years ago, and among them are companies called "Cooperative" on the basis that they are halal. And commercial insurance, as far as I know, involves some form of riba or things that are not... Commercial insurance is more about profit than cooperation. Cooperative insurance is the cooperation of several parties, I believe. Several parties in cooperative insurance.
Welcome back, dear viewers. Your Eminence Sheikh, we saw the report. A group of people did not know the difference between cooperative and commercial insurance, and perhaps only two knew the difference. I believe this answer, this survey, is expected. Few people realize the difference between commercial and cooperative insurance. Cooperative, we have talked about commercial insurance. Correct. What is cooperative insurance? Cooperative insurance is a type of solidarity and mutual support among a group of people who are exposed to similar risks. They gather among themselves and pay subscriptions, and if harm befalls one of them, they compensate him. Yes. For example, doctors. Yes. Each of them pays a subscription, say 1000 riyals. So that if one of them makes a mistake in an operation, or something happens, compensation is paid from these subscriptions. Yes. Taxi drivers, for example. Yes. They subscribe among themselves and pay amounts so that if one of them causes an accident, compensation is paid from these subscriptions. It could be a tribe, for example. Correct. We hear about family funds. They subscribe among themselves. If one of them causes a fatal accident, or needs treatment, or otherwise, compensation is paid from this subscription. This is called what? Cooperative insurance. Cooperative. This involves solidarity, some solidarity among these people. Perhaps these cooperating parties among themselves, who manage the insurance process, are one of them or some of them. Correct. And they may contract with a company. Yes. Saying the company is the one that manages this, for management only. This pattern exists now in a number of cooperative insurance companies. They establish cooperative funds and say, "Subscribe, O people, and I will manage this fund for you for a fee." And they take a fee for management. We notice that this company, a profit-making company, profits. But from what does it profit? It does not profit from compensation, but rather from the fee it takes for management, for something known. Yes. But the money in the cooperative fund, yes, the subscriptions, who do they belong to? To the subscribers. To the subscribers. And this is the most important difference between cooperative insurance and commercial insurance. In commercial insurance, when we pay to the insurance company, yes, the premiums, these subscriptions that the insurance company takes, they are for itself. Yes. So, a commercial insurance company, let's assume a group of people subscribed, paid subscriptions. Yes. The group of subscriptions the company received during the year, for example, 10 million. Yes. And the company paid 8 million in compensation. Yes. This means a profit of 2 million. Why? Because it considers all the money in this fund to be its own, so it pays compensation, and the rest is for it. Therefore, there is risk in this matter.
So, do all cooperative insurance companies do that? This is the question. No, I tell you, a cooperative insurance company might call itself cooperative insurance, but in reality, its work is commercial. So, how do we know if this company is a cooperative insurance company or a commercial one? What happens to the money in the fund? Does the surplus beyond the risks belong to it or to the policyholders? This is the crucial point in distinguishing between cooperative and commercial insurance. What is the ruling on cooperative insurance? Yes. It is clear from its nature. Cooperative insurance, what is its goal? To remove harm. Solidarity. Mutual support. The Islamic Sharia encourages a person to cooperate with others to mitigate harms. Scholars call this "munaahadah." What does "munaahadah" mean? We call it in colloquial Arabic "al-qitah" (the collection). Yes. You know, for example, a group of five go on a trip to Mecca, for example, and each of them pays a subscription of 200 riyals for food, drink, and accommodation, and so on. And the drinking might differ from one person to another. One might eat half a chicken, and another might not eat a quarter of a chicken. There is a difference, but we do not call this difference gharar, which is prohibited, because it is cooperation. Just as in cooperative insurance, one might be harmed, and compensation comes, which is more than for another. But this is overlooked because this insurance is what? The goal is cooperation, not profit-making among the participants.
So, we have distinguished between cooperative and commercial insurance. Yes. Are there other forms of cooperative insurance? We mentioned the family funds, the mutual funds that exist among professionals, doctors, engineers. Yes. Social insurance also falls under cooperative insurance. What does social insurance mean? The state establishes funds, such as the pension fund, the social insurance fund. It takes subscriptions from employees. The percentage deducted from the employee. Yes. In order to give the employee, when they reach a certain age, say age 60, when they may be unable to work, they are paid a salary. This is the purpose. It is not for the state to profit or gain. On the contrary, the state usually supports these funds. Correct. Correct. Because its purpose is not commercial, but rather to achieve protection for these participants and solidarity and mutual support, and a way to cover cases of disability in old age, so that a person is not a burden on others. Therefore, such gharar is overlooked, and it is considered cooperative insurance. Beautiful.
What is the ruling, Sheikh? The ruling on insurance, as we mentioned, in detail. Yes. Commercial insurance, we said it is based on gharar. The exchange in it oscillates between winning and losing. Therefore, it is prohibited. Yes. While cooperative insurance is a permissible contract because it is based on solidarity and mutual support. Here, when we come to commercial insurance, which we say is prohibited, and unfortunately, it is the most widespread globally. But in the Kingdom now, the most prevalent is cooperative insurance in practice. But we are talking about it theoretically. A person must know the difference between these two types because they may need insurance, health insurance, car insurance, insurance against accidents, fire, or otherwise. So, they must distinguish between them. Regarding commercial insurance, as we said, it is prohibited, but in some cases, it is an exception. We previously talked about gharar and said that gharar is not prohibited unless certain conditions are met. We mentioned four conditions: that there is a need for the contract, that it is abundant, that it is in an exchange contract, and that it is intended in the contract. Here, commercial insurance is prohibited because of the gharar in it. Correct. If one of the conditions of gharar is not met, then this is permissible. We apply the same rule we took before. For example, yes. If commercial insurance is incidental to the contract, yes, not the primary subject of the contract, then it is overlooked. For example, one rents a car, and the rented car is insured with commercial insurance. Here, we say the contract is incidental. The person did not enter into the insurance contract primarily; it is incidental to renting the car. Correct. So, there is no harm. One buys a device, yes. The seller says, "This device is insured against breakage or loss or theft." You buy it with the insurance from the manufacturer, or from the seller himself. Here, you buy the device with the insurance on it. This is permissible because the insurance is incidental, not the primary intention of the contract. Commercial insurance, we are talking about commercial insurance, not cooperative insurance, is permissible. It is permissible if the contract is driven by necessity. How? Someone lives in a country where the entire health system is based on commercial insurance. If they do not take out commercial insurance, they will not find healthcare, or the cost of treatment will be extremely high, like Muslims residing in Europe and elsewhere. The entire system is based on commercial health insurance. Here, we say there is no harm in taking out commercial insurance. Or, for example, in a country that mandates car insurance, and you cannot complete car contracts without insurance, and only commercial insurance is available. Here, we say this is necessitated by need, and gharar contracts, if necessitated by need, are overlooked, as previously explained. Yes.
Another case where commercial insurance is permissible is if it is free, without compensation. Yes. Like the insurance provided to employees. Yes. Sometimes, in some sectors, companies find that the company gives an employee a benefit by insuring them with commercial insurance, even if it is commercial. So, we say there is no harm for the employee to accept this insurance because it came to them for free. So, these are the first part, or what we discussed regarding gharar, which is insurance, and we discussed it extensively because it has a strong connection to gharar. There may be some other modern transactions that also have a connection to gharar contracts. Yes. I see that we should continue. It is fine. I would like to mention that commercial competitions are always mentioned in relation to gharar. Yes. And this is what I was hoping for, in fact, to talk about these issues that are related to gharar. Just as insurance has a connection to gharar, so do commercial competitions. What is meant by commercial competitions? A company announces a prize, for example, a car, or a draw for a set of gold. Correct. What is the ruling on these competitions that these companies hold? We say these commercial competitions, if they are without compensation, entering them is without compensation. Yes. Meaning, you can participate in the competition without buying a product or paying an entry fee. So, this is permissible because there is no gharar now. Because the contract does not revolve around winning or losing. You might win, or you might remain safe. If you win the car, you have won. If you don't win the car, you have lost nothing. So, this is not gharar.
The second type of commercial competition is competitions that involve compensation for entry. Yes. And this has two forms. The first form is that there is a fixed fee for it. Yes. Meaning, they say there is a coupon entry fee. To enter the competition, you must buy the coupon, for example, for 10 riyals. So, this is considered a sale of gharar, even if the amount is small, like one riyal. They said, correct. Why? Because I pay. I might pay 10 riyals and win a car. Correct. So, I would be a winner. And I might pay 10 riyals and win nothing, so I would be a loser. This has spread widely, Sheikh, especially in relation to telecommunications. Yes. Telecommunications are charged. It might be five riyals, seven riyals, and you enter. It's like gambling, isn't it? Correct. The call is not at the usual price. Correct. There are fees for the competition. Correct. Sometimes it's a 700 number, and so on. So, one pays a fee to enter this competition. So, this is considered gambling, gharar, which is prohibited by Sharia, because the competition now involves compensation that the person pays, which is the fee that goes to the company that set up the competition. Correct. The company makes millions, and the winner might not get anything significant. Correct. Something insignificant. And in reality, I have come across some of these competitions. You find that people rush to them in a big way, unfortunately. Glory be to Allah. You find channels, yes, telecommunications companies, newspapers, and others offering such competitions, and people call. Correct. With this high-cost number, and huge amounts flow to this company. Yes. In exchange for these trivial prizes. Correct. Sometimes the competition requires buying a product from the company, but without a fee. For example, a restaurant owner or a gas station says, "Whoever buys from me will be eligible to enter the competition." Notice, they did not set a fee for the competition itself, but they made buying a condition. Buying here, we say if the cost of buying has been raised, the prices have been raised for the competition, then this is from gharar. But if the price is the same, and the person who buys the product buys the product, and they actually need it, they don't go and buy, for example, newspapers, newspapers, and throw them away because the first newspaper is the same as the second newspaper, there is no difference between them. Here, we say if the person actually needs this product and buys it and enters the competition incidentally, then there is no harm. They want to fill up with gas. Correct. But they know that this station has offered a prize, so they say, "Instead of filling up at the first station, I will fill up at the second station," and the cost is the same without any increase. So, what appears is that this transaction is permissible.
There is a situation similar to this, Sheikh, which is that they set a certain amount and say, "Whoever buys for 200, they will get such-and-such. Whoever buys for 300, they will get such-and-such." This is good. What about points? You mentioned earlier that if I buy for 200 riyals, I get a gift, and if I buy for 300, I get a gift. Sometimes some people buy amounts they don't need, just to get these gifts. Here, the prohibition is not because of gharar. Yes. The prohibition is because of extravagance or squandering money. Here is another important consideration for prohibition. Yes. Not all prohibitions in Sharia are gharar or uncertainty. The fact that one buys a product they don't need is from squandering money, which Allah Almighty has forbidden by saying, "And do not spend wastefully." Wastefully. Yes.
Sheikh, what about what are called "جمعيات" (gatherings or rotating funds) that occur among employees? Yes. They are not insurance, clearly, but a group of employees each contribute a certain amount. The first month goes to the first person, the second month to the second, and so on. So, this is not clearly insurance. What is its ruling? This is, in reality, a type of mutual loans among them. Mutual loans. Each of them lends to the other. And as long as the benefit is shared among them, and no one has an advantage over the other, and in equal amounts, then the Sharia rule is that loans, mutual loans, if they are on the basis of equality among them, are permissible by Sharia. This is not considered riba, nor is it prohibited by gharar or gambling. It does not involve, for example, a debt that brings a benefit. No, it does not bring a benefit because everyone is participating. What is prohibited in a loan that brings a benefit is if the benefit is for one person at the expense of another. But if the benefit is shared by all equally, then scholars have stated that this type of benefit is permissible. And scholars give the example of "safatij" (bills of exchange) that used to exist in the past. One would lend to another to transfer money to another place.
May Allah reward you, Your Eminence Sheikh. May Allah reward you and bless you. And may Allah reward you, brothers and sisters, viewers. We will meet you, Allah willing, in the next episode. Until then, peace, mercy, and blessings of Allah be upon you.