Introduction

The institution of insurance in one form or the other is as old as man himself. The first type of insurance was of the nature of sharing risk of life in a group and this form of insurance is surmised to have appeared sometime between the age of savagery and barbarism [1]. In the Arabic peninsula, which in much later years was to become the seat of Islam, insurance in its earliest form was looked upon as payment of blood money by a group to lighten the loss of a member of the group. This was a form of mutuality in pre-Islamic tribal Arabia [2].

Today after many centuries of the institution of insurance, while all of the Western world has accepted it as a part and parcel of its social order, the debate on its admissibility in Islamic perspectives goes on [3]. In the Islamic legal literature the subject of insurance has received careful study. However, in the literature on Islamic economics, infant as it is today, the subject of insurance has received almost no attention.

In the debate on the admissibility of certain forms of modern insurance contracts, particularly life insurance contract under Islamic Law, the following points of unacceptability have been raised.

(1)  Under the modern actuarial methods of estimating future risk, the nature of risk appears as an indeterminate thing. Consequently, charging of premiums in individual life insurance leads to the pricing of a thing that is indeterminate.

(2)  Since the number of premium payments to cover the risk remains undetermined, therefore, there are no well-defined reciprocal possessions of the things in exchange at the time of contract.

(3)  The insurer himself does not share in the pooled-risk of the insured, which in turn is covered by the premiums, while the insurer earns the interest on the premiums merely for his service in efficiently predicting the risk for the insured.

(4)  The modern business of insurance is based totally on interest-based financing and investment, which are forbidden by Islam.

Any form of insurance contract that is admissible in Islam must, therefore, be based on a negation of the above points. It must then be judged whether the alternative forms of insurance contracts are capable of providing economic utility to the insurer and the insured. It must finally be examined whether the alternatives are defensible under Sharia (Islamic Law), which in the matter of financial transactions forbids unjustified enrichment for the insurer and unjustified risk for the insured [4].

Objectives

The main objective of this article is first to analyse the status of admissibility of certain forms of life and other contingencies insurance contracts in Islamic perspective. This issue of admissibility will be analysed from an Islamic economic viewpoint based on the principle of-financing such insurance plans by the insurer and the insured. We shall establish in this article that in Islamic perspective mutual insurance is a broad category of insurance which legitimately covers both group life and certain forms of social insurance.

The Contract of Insurance in Islam

The contract of insurance is just one of many financial contracts based on the same principles of Islamic law. The type of financial transaction represented by insurance falls into a mixture of the following two categories of Islamic financial contracts [5]:

(1)  the contract of "salam", i.e., exchange of monetary value for a determinate thing.

(2)  the contract of "sarf', i.e., exchange of one monetary value for another monetary value.

Let us first place the transaction of "salam" in its proper context as insurance contract. Here the insured in return for monetary contribution or premiums obtains a promissory deal from the insurer for an option to convert his existing insurance policy to another type of policy, after a stipulated period of time or in the event of a certain contingency. When the option is a cash-flow we have strictly speaking a "sarf' transaction and not a "salam" transaction. Under "salam" transaction, therefore, the determinate thing in exchange for a certain amount of contributions from the insured is a promissory insurance option. However, the contract does not become determinate if the number of payments of premium is left undetermined at the time of contract. In such a case, the insurance contract will be tantamount to a coverage for risk that is indeterminate, and this is not acceptable in the Islamic perspective.

Therefore, from an economic standpoint the amount and number of payments of contributions by the insured must be clearly stated for a well-defined insurance option. Such a clause is really tantamount to having only short-term insurance contracts, renewable at the end of stated short periods of time, most often a year. A short-term insurance contract is also recommended because it would leave the money value of goods in exchange in the absence of interest, undepreciated.

Types of goods that cannot, therefore, belong to the "salam" category of contract are gold, silver, animals. To this category must be added perishable goods, such as foodstuffs, machines subject to rapid value depreciation, like cars, and rapidly changing technology. In the case of such goods a delay in delivery of the goods would increase the opportunity cost of such transactions that would include not only a capital cost but also a subjective real cost [6]. The imputation of a subjective real cost cannot be accepted in Islamic perspective.

In the case of life insurance contracts the insured is expected to pay an indefinite number of premiums to cover the risk of life. But this risk may not exist at anyone given point of time. This is tantamount to pricing an indeterminate risk, which is clearly interpreted as "Riba" (interest or usury) in Islam and is, therefore, altogether forbidden. In the Islamic transaction principle of "salam", therefore, the price fixity, good definition of contract, and short-term delivery of goods in exchange must be the essential qualifying elements of a contract. Price fixity here would mean a contribution rate jointly agreed upon by the insurer and the insured; good definition of contract means the unambiguous nature of the product of insurance being purchased; and short-term delivery would mean yearly renewable term insurance [7].

Let us now look at the "sarf" transaction. It is in regard to this form of financial transaction, i.e., exchange of money value for another money value separated by time, that the insurance business becomes susceptible to "Riba". The law of Riba in respect of fungibles (in this case monetary value) is that there must be strict equality in weight or measure as the case may be, and immediate delivery of the goods being exchanged [8].

In order to place the modern insurance contract in its proper perspective in the "sarf' transaction, we must examine closely the law of Riba. The condition of strict equality by weight or measure as the case may be, and the immediate delivery of goods, implies two things.

(1)  When the transaction involves no time lag, the exchange of the goods is automatically immediate and the value of the exchange is determined by the price of the goods in a market economy, denoting a measure of value, or by equality in weight in the case of a barter economy. In such a simple case "Riba" would, mean excess pricing over and above the market value of the goods either in weight or measure. This is a case of monopolistic competition. Such a situation is not of much interest to insurance contracts where there is definitely a time lag in the delivery of goods. We must therefore, examine the meaning of the "Riba" statement in an inter-temporal allocation of goods in exchange.

(2)  When the transaction is of an inter-temporal nature, the monetary return from a "sarf' transaction invariably takes place after a given period of time, contingent upon the occurrence of a stated contingency. In such a case the statement of the law of Riba must be interpreted as meaning immediate payment of the monetary value at the time it becomes due in return for the premiums paid for that period of time in advance. Contingency here would mean both the risk of life or in its absence the return of dividends. This is a point that will be explained in detail later on.

The inter-temporal economic equivalence of pooled contributions or premiums to the monetary value of the claims still remains a big question. What is it that, in an Islamic insurance business, would establish the equivalence of cash-flows at two different points of time? In the conventional economic understanding this is the rate of interest, whereas, in an Islamic economy it is an equity sharing rate, generated through the principle of "Mudarabah", or joint partnership on a profit and loss sharing basis and arising from an inter temporal allocation of money capital to real investment [9]. Unlike the rate of interest that measures the cost of capital, a subjective rate of time preference and a declining utility of savings over time [10], the rate of discount in the Islamic framework of inter temporal allocative efficiency is the sum of the marginal efficiency of capital and the risk premium optimally determined through the institution of Mudarabah.

An Islamic Critique of the Modern Economic Theory of Insurance

An insured's economic decision in the purchase of insurance is based on an utility criterion [11], which denotes a positive function of his expected savings, i.e. future benefit payment, and a declining function of the expected risk of all other members in a group. The insured's utility function is, however, not a decreasing function of his own risk, because this is assumed to be compensated for by the realisation of the benefit payment. Therefore, through the principle that the insurer maximises his own utility function in risk and return, subject to holding the total pooled risk constant, the insured is made to pass on his risk coverage to another's shoulder in the group, in return for premiums. The premium rates are, therefore, estimated to be large enough to cover the cost of benefit payment.

The premium income builds up the policy reserves that cover the total risk. On top of this the premium income is also subsequently invested in a fairly riskless combination of short- and long-term assets to yield a sufficiently high rate of return. The returns are used in reserve accumulation and for dividend payment to policy holders and management. These investments take the form of corporate bonds, mortgages, direct loans to business firms, preferred and common stocks, federal, state and local government bonds, real estate, and direct equity investments through partnerships in various enterprises.

(a) Life Insurance

Accumulation of insurance funds through investment in real assets is, therefore, an important function of insurance companies, particularly of life insurance companies. Table I shows that in the United States the size of the total reserve accumulations of life insurance companies stood at an average annual of 82 per cent of total assets between the years 1950 and 1974. Of these, other obligations and unassigned surpluses stood at about 17 per cent of the total assets on an average [12]. This picture is indicative of the increasing financial monopoly being assumed by the life insurance companies among all financial intermediaries in a capitalist economic setting. The total financial assets of life insurance companies were only next to commercial banks as shown by Figure 1.

The phenomenal accumulation of total life insurance reserves is made possible because of the level premiums on life policies. Under this arrangement a constant premium is paid by the insured at a given age for the whole of his life. The excess of the premium over the cost of protection is the early years of policy is invested to accumulate at a compound interest rate to arrive at the total reserve.

Figure I. Total Financial Assets of Major Types of Financial Institutions

Table I. Assets, Policy Reserves_ and other Obligations of US Life Insurance Companies ($ amount in millions)

* Includes reserves for credit life insurance, which amounted to $653 million in 1974.

+ Includes reserves for individual annuities and supplementary contracts with and without life contingencies.

# Includes policy dividend accumulation and funds set aside for such dividends, special surplus funds, unassigned surplus, capital of stock companies, and other items.

§ Estimate based on 1956 data.

Source: Institute of Life Insurance.

Reproduced from Capital Formation through Life Insurance, by G. A. bishop, Richard D. Irwin Inc., 1976.

Let us look at this picture of modern insurance functions from an Islamic perspective. First, the indeterminateness of risk is clearly in the picture. The mortality used to set up total reserves has a built-in allowance for mortality rates higher the experience has shown to be realistic. This is due to the use of total mortality rates opposed to age-specific and sex-specific mortality rates of individual life policy [13]. Consequently, the margin of difference between the policy reserve and the total reserve must be made up in the aggregate by premium loadings and the interest returns on the investment of premium income.

This type of premium and reserve construction implies two things:

(1)  increasing cost of life insurance over and above that projected by the use of pure premiums (without loading), and the subsequent increase in profits for the insurer;

(2)  the indeterminacy of the exact number of payments of premiums up to the time that risk of life is realised, and consequently, the Islamic voidance of the life insurance contract.

The mode of accumulation of insurance reserves and unassigned surpluses contradicts the Islamic principle of financing on two grounds:

(1)     level premium in the absence of a determinate Islamic financial contract as explained above, plus the long-term investment in real assets to earn interest, are both Riba;

(2)     long-term promissory delivery of monetary value (insurance value) as in the case of whole life insurance policies, is inadmissible in Islamic perspective, both from the point of view of indeterminacy of risk as well as the subjective real cost of capital.

It is clear from the picture on financial leverage enjoyed by life insurance companies in North America, particularly in the case of stock companies, that the interest earnings on accumulated funds only strengthen the capitalist owners. This point can be substantiated further by Table II, which shows the phenomenal size of the total reserves and unassigned surpluses of life insurance companies compared to the total benefit payment. Also, compared to the growth of personal disposable income and benefit payments, the growth of the reserve funds has increased dramatically.

Such a growth of insurance reserves vis-a-vis personal disposable income and benefit payments is a gross distortion of the principles of co-operation, the allowance for normal profits, and the principle of equity, that forbids undue enrichment of the insurance companies at the expense of policyholders, It is, therefore, totally unacceptable in Islamic perspective.

In the conclusion to this section we can say that the modem life insurance business in all its different aspects is inadmissible in the Islamic perspective as it negates the following principles of Islamic contract.

Table II. Trends in Personal Disposable Income, Reserve, Surpluses and Benefit Payments of Life Insurance Companies in the United States: 1950-74

Source: Computations using data from the Institute of Life Insurance, US Department of Commerce and Social Security Administration.

(1)  The good in exchange, whether as fungibles or as quantity, must be capable of delivery. Prophet Muhammed has forbidden the sale of things, which are not determinate [14].

(2)  No aspects of the financial contract must be of a subjective nature. They must be unambiguously known to the partners.

(3)  The financial transaction involved in the contract must be permissible under Islamic Law.

(b) Group Life Insurance

Group life can operate both on a contributory (employees contribute voluntarily to buy additional protection) as well as on a non-contributory basis. When the group life is of a purely non-contributory type, i.e., the employer pays all the cost of insurance for a group of employees, it can be categorised under the Islamic contract of "Hiba", i.e., a simple gift type of contract. Furthermore, where group life is combined with group health insurance, the resulting insurance plan in principle is all the more acceptable in Islamic perspective.

The general admissibility of group insurance in Islamic perspective remains valid even for contributory types of such insurance plans. The employee is then encouraged to contribute voluntarily to an employer-managed 'waqf' (endowment). The "waqf" also includes the employer's own fixed contribution on behalf of the employees under the group plan. The "waqf" now acts as a reserve from which the employee benefits both through benefit payments in case of stated contingency and also through dividends paid out annually. How this works will be explained below.

With contributory and non-contributory forms of group insurance existing side by side in an industrial environment the employee has the option of participating in either of the two. Thus, between the employee and the employer group insurance can be developed as a co-operative insurance. Group insurance as a term insurance would call for a voluntary contribution to cover the cost of protection on an annual renewable basis. This reduces the nature of risk to a determinate phenomenon. Unused premiums can be invested in short-term riskless equities on the principle of "Mudarabah", to earn a normal rate of profit. In this way, consequently, a minimum "waqf" is established, after dividends are declared to the policy holders annually. The chance of undue enrichment by the insurance companies would be eliminated. All these would justify group insurance as a valid Islamic financial contract.

In the Islamic perspective benefits from a non-contributory plan would be flat insurance proceeds in the event of the occurrence of a stated contingency. Because the employer pays the cost of protection in this case, therefore, the benefits from the plan would remain independent of the earnings of various employees in the group. Benefits are thus distributed evenly through the group. This in turn would allow a broader coverage of the number insured in the group plan. This is what the dictates of equity would demand. In an Islamic perspective the nature of group insurance as mentioned herein must be extended universally in the industrial sector irrespective of one's earnings and professional category.

In contributory types of group insurance the employee can be considered as a shareholder in the corporation. In Islamic perspective, the employee as a shareholder is entitled not only to the part of the "waqf' built up by his contributions, but also to the return on these contributions net of meeting a minimum reserve requirement for the group insurance.

In contributory group insurance contracts, the benefits, both as insurance payment as well as dividend payment yearly, would depend largely on the type of investment in which the employer puts the shareholder's contributions. The type of investments to be looked for would be those that maximise investment return, both on a short- and long-term basis, so that after dividends are paid out annually, a minimum reserve is maintained to payoff benefits when they become due. The investments chosen must be as little risky as possible, so that a guaranteed level of "waqf" reserve can be maintained. This is possible through risk diversification in public and private sector investments, particularly, in common stocks. This would be effective in Islamic economies with their smaller speculative uncertainty of capital markets.

In an Islamic capital market such a risk diversification is effected through the institution of "Mudarabah", i.e., the profit and loss sharing system in joint Islamic entrepreneurial ventures. It has been shown by the author elsewhere [16], that a large corporation, such as a central bank, commercial bank, investment corporation and other large financial intermediaries in an Islamic economy, can diversify the risk not only of the joint entrepreneurs but also its own risk in capital investment. It can do so because as a highly centralised form of public institution it has better information about future risk and returns from an uncertain project. Also, by involving as many private entrepreneurs as possible in joint investment ventures, the public authority can pass on a substantial part of the total risk through the private sector to the tax payers or multiple firms. This is the process of risk diversification.

The institution of Mudarabah, therefore, helps in maximising investment returns through market forces, while it also minimises the riskiness of real investment through risk diversification. In this way the solvency of the "waqf" fund as a reserve fund for a group insurance is guaranteed.

We need to point out two points with regard to the nature of group insurance in Islamic perspectives. First, that the nature of a financial transaction over the waqf fund precludes the need for an exclusive life insurance company selling group plans. Secondly, in the absence of an exclusive life insurance company to manage a group plan, the group insurance arrangement in the Islamic perspective becomes a self-insuring arrangement [17].

Group and self-insurance in the Islamic perspective are special cases of the broader category of insurance known as mutual insurance. The Islamic principles of co-operation and risk diversification through Mudarabah make mutual insurance the single most admissible form of pooling risk. Other extended forms of this mutual insurance device are workmen's compensation, disaster insurance, and social insurance.

Mutual Insurance in Islamic Perspective

By definition a mutual insurance company would be owned and controlled by policy holders [18]. There would be no stockholders and, therefore, no capital stock. This would result in an insurance arrangement where there is no profit for the insurer and all insurance is provided at cost. This is the conventional idea of mutual insurance. Mutual insurance schemes could be affected by two kinds of risk:

(1)      those which occur fairly regularly year by year.

(2)      those which occur irregularly over a period of years.

Mutual insurance would not cover contingencies which are fairly uncertain and remote in time, because in the Islamic perspective the mutual insurance would operate as a one-yearly renewable term plan, with a pay-as-you-go method of financing. The first type of cost needs small reserves to be accumulated. In both cases a high level of liquidity and only short-term investment support are required for mutual funds. Consequently, the problems of long-term financing, such as hedging against inflation, choice of long-run productive investments, automatic stabilisation of economic downturns, do not inhibit the pay-as-you-go method of financing involved in mutual funds.

In Islamic private insurance schemes the pay-as-you-go method of financing is indeed the recommended method. This point has been made earlier too. Each year estimates are made of the total cost of benefits and the "waqf' is activated to meet this cost. If any pant of it is left undepleted, it is returned-to-the shareholders (policy holders) as dividends after establishing a minimum reserve. These dividends are generated through short-term investment of the shareholders' contributions into equity shares of the corporation (insurer) operating on the principle of Mudarabah.

In Islamic perspective the scope of mutual insurance is slightly different from that of conventional mutual insurance. In the conventional system premiums are fixed, which is tantamount to a pre-determination of risk. This point was discussed earlier. The annual proceeds from the premiums are not invested, i.e., the conventional mutual company does not have capital stock, does not build up reserves, and does not have profits. In the Islamic perspective fixed premium is inadmissible replaced by the insured's own voluntary contribution. In the broader case of mutual institutions there are Islamic injunctions to make the insured's contribution to the mutual fund compulsory [19]. The annual net reserves after deducting year benefit payments, administrative costs and dividends are invested in common pursuits permissible in Islam, so that a reasonable amount of accumulation mutual funds takes place to maintain the reserves.

(a) Workmen's Compensation

Islamic mutual insurance schemes can be effectively applied to workmen's compensation (industrial mutuals). The workman enters into a mutual sharing of price and risk with his employer by voluntarily contributing his premium to "waqf", gets in return a promise for wages, a dividend in proportion to the level of contribution, and compensation for work-place injury.

An argument is also made to form a collective where profits in different firms pooled. In this way profit-sharing between the workmen and the single-employee firm is made independent of the employment condition of the firm, the expected profits of which would determine the workers' employment prospects [20]. Real diversification would, therefore, be effected by establishing a mutual fund involve the pooled risks of several firms.

Direct profit-sharing plans by workers seem to have experienced a tremendous growth in the United States since the year 1950, particularly, because of favourable treatment of such plans and their participants in the corporate income tax laws [21]. In an Islamic mutual insurance scheme a similar Zakah (Islam wealth tax) reduction would exist for the shareholders (policy holders) who mobilize their savings into real investment through the mutual fund.

(b) Farm Mutuals

Although farm mutuals work on the same principle as other mutual insurance schemes, it is interesting to note that this is a case that can be directly funded Zakah (Islamic wealth tax). One of the purposes of Zakah is to ameliorate those in debt or struck with heavy losses. Now in terms of disaster in the farm enterprise, the affected farmer who was once a contributor of Zakah to Bait al-Maal, (Islamic public treasury) can now himself qualify for economic assistance from.

This principle of Zakah funded mutual insurance scheme would apply to other forms of disasters like flood and earthquakes. It has been found that conventional insurance companies have not been able to extend coverage in these types of low probability, high disaster situations because the information on risks and consequence the perils is not sufficiently well-known to the insurance industry [22]. In the United States the National Flood Insurance Act of 1968 induces individuals to protect themselves against losses from flood disasters. Private firms’ market policies deposit premiums in a common pool operated by the National Flood Insurance Association. The sale of flood insurance has been limited to those home owners’ flood-prone communities who agree to regulate development of their flood plains. The flood insurance scheme has now become compulsory for flood prone are homeowners so that they can qualify for flood hazard loans [23].

It is noted that in such disaster insurance cases, the pooled risk has to be shared by the private and the public sector jointly. Zakah is an example of such a public policy in the area of disaster mutual insurance covering such contingencies as farm disaster, flood and earthquakes.

(c) Community-Based Mutual Insurance.

At the community level the Islamic mutual insurance scheme comes closer to a social insurance scheme. Types of assistance under the mutual fund that could be available in this case would be financing of programmes of human capital formation and self-employment assistance. Zakah is particularly effective in this area, when the programme reaches the needy.

It is well known in the literature on manpower planning [24], that in the event of structural unemployment, disguised unemployment and under-employment, monetary and fiscal policies implemented to improve the hard-core unemployment situation are not found to be effective. This is due to the failure of macroeconomic policies in tackling problems that lie embedded at a very micro-level, as in the case of pockets of hard-core unemployed and disadvantaged. Now, since one of the expressed objectives of Zakah is to provide cash benefits, training and education to the needy, it is found to be an effective instrument of alleviating the problems of the hard...core unemployed and disadvantaged.

It has been shown elsewhere [25] that Zakah used for funding training programmes and unemployment assistance programmes is found to be associated with an income multiplier effect. For, as Zakah rate increases on real assets, it will cause holders of idle cash balances to put them into productive use. Investment flow thus generated will cause income to increase through the multiplier effect. Increased investment on the other hand will create a higher labour force participation rate.

Mutual insurance can, therefore, be used in certain short-run programmes of social assistance, leaving the long-run programmes to be covered by social security. In those cases Zakah would be a powerful instrument for financing the cost of the associated contingencies [26].

Conclusion

We have noted in this article that the essence of the mutual insurance system in Islam is based on the applicability of Shariah in the realm of financial transactions. Its overwhelming note is one of equity and ethical perfection, as the Quran says, "The Believers, men and women, are protectors, one of another". To establish mutual insurance schemes at a Muslim community level in accordance with Islamic principles is not merely a spiritual necessity. It is also a greatly profitable undertaking at a time when the capitalist world and its institutions are forever sinking into the abysmal depths of despair and despondency.

References

1.       Morris, C., Civilisation: An Historical Review of Its Elements, Vol. I, Chicago, 1890.

2.       al-Marghinani, Burhan al-Din, al-Hidayah, Vol. 4, Lucknow, 1896-1902.

3.       Muslehuddin, M., Insurance and Islamic Law, Lahore, Islamic Publications Ltd., 1969, Chapter IX.

4.       Schacht, J., An Introduction to Islamic Law, Oxford University Press, 1964, p. 201.

5.       Rahim, A., Muhammadan Jurisprudence, Lahore, 1963.

6.       Dobb, M.-- "The- Trend of Modern Economics" , in Political Economy and Capitalism, Routle and Kegan Paul, 1937.

7.       Athearn, J. L, Risk and Insurance, New York, West Publishing Co., 1977, chapter

8.       Muslehuddin, M., op. cit. Chapter VIII.

9.       Choudhury, M. A., "The Rate of Capitalisation in Valuation Models in an Islamic Economy forthcoming in the Proceedings of the follow-up Seminar on Monetary and Fiscal Economic Islam, Islamabad, January 6-11, 1981.

10.   Naqvi, S. N. H., "Interest Rate and Intertemporal Allocative Efficiency in an Islamic Economy paper presented at the International Seminar on Monetary and Fiscal Economics of Islam, Me, 1978.

11.   Green, M. R., "Attitudes Toward Risk and a Theory of Insurance Consumption", The Journal Insurance, Vol. 30, 1963, pp. 165-82; Murray, M. L, "Empirical Utility Functions and Insurance, Consumption Decisions", The Journal of Risk and Insurance, Vol. 39. 1972, pp. 31-41.

12.   Bishop, G. A., Capital Formation through Life Insurance, Homewood, Illinois, Richard D. Ir Inc., 1976, chapter 3.

13.   Spiegelman, M., Introduction to Demography, Harvard University Press, 1957.

14.   Muslim, Sahih, Kitab al-Buy'u, Vol. I, Bulaq, 1873, p. 443.

15.   Athearn, J. L, op. cit., chapter 20.

16.   Choudhury, M. A., op. cit.

17.   Athearn, J. L, op. cit., chapter 2.

18.   Athearn, J. L, op. cit., chapter 21.

19.   Muslehuddin, M., op. cit., chapter XI.

20.   Ali, A., "Risk-bearing and Profit sharing in an Islamic Framework: Some Allocational Considerations", paper presented at the follow-up Seminar on Monetary and Fiscal Economics Islam, Islamabad, January 6-11, 1981.

21.   Athearn, J. L, op. cit., chapter 20.

22.   Arrow, K. J., "Uncertainty and the Welfare Economics of Medical Care", American Economy Review, Vol. 53, 1963, pp. 941-73; Akerlof, q.,"The Market for 'Lemons'; Quality Uncertainity and the Market Mechanism", Quarterly Journal of Economics, Vol. 84, 1970, pp. 488-500.

23.   Kunreuther, H., Disaster Insurance Protection Public Policy Lessons, New York, Wiley, 19, chapter 1.

24.   Levitan, S. A., et al., Human Resources and Labour Markets, New York, Harper & Row" 19p.22.

25.   Choudhury, M. A., "A Social Service Model in the I-Economy", Proceedings of the Seventh annual Conference, Association of Muslim Social Scientists, Plainfield, Indiana, July, 1978.

26.   Rahman, M. I. A., "Zakah Social Justice and Social Security", Outlines of Islamic Economic Association of Muslim Social Scientists, Indianapolis, Indiana, March, 1977.

*The author is Assistant Professor of Economics at the Department of Socio- Technical Studies, King Abdulaziz University, Jeddah, Saudi Arabia.

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