II. Insurance in Islamic History

In the Islamic history, the idea of insurance was mainly reflected in the various schemes of mutual help and assistance whenever a calamity or misfortune struck a person. In some cases it was an arrangement of compensating for the evil deeds of a member of group or tribe by all the other members, or by an individual rich member who volunteered to do so, 'Insurance' was therefore, not a business for profit-making but a means to help the needy on a voluntary gratuitous basis.

'Aqila was a well-known pre-Islamic notion, which Islam also approved, where all the members of a family or tribe mutually pooled their resources to ransom a member of the family or tribe who had committed a murder. They helped to pay the diya (blood-money) to the next-of-kin of the person killed in order to save the culprit from retaliation[4].

Merchants of Makkah used to have a scheme to compensate business-expedition losses and also those who suffered through natural hazards. Says Afzal-ur-Rahman:

"Even before the Ministry of Muhammad the Makkan merchants had formed a fund to help the victims or survivors of natural hazards or disasters during their trading journeys to Syria, Iraq and other countries. It so happened that once, when Muhammad was engaged in trade in Makkah, a whole trading caravan, apart from a few survivors, was lost in the desert. The managing board, composed of the members of the contributory fund, decided to pay the price of the merchandise, including the value of camels and houses destroyed, to the survivors and families of those who perished in the disaster out of the common fund. Muhammad, who was trading with the capital of Khadijah, had also contributed   to   that   fund   from   his

profits[5]."

Daman khatr al-tariq (surety for hazards on highway) is cited by Mustafa al-Zarqa in support of insurance. If one person asks another to take a particular route and says it is safe and he stands surety for any loss, then he would be so liable if some loss is incurred by the second person[6].

Some other ways in which the idea of mutual help and amity was realized were:

 (i)     'aqd muwalat (contract of mutual amity);

(ii)   hilf (confederate)—where all mutual help was guaranteed through an agreement      between persons; and

 (iii) the acceptance of a person by a tribe or family as one its own class or community for every calamity that might come to him.

It is recorded by Ibn Abidin that during the last century there was a marine insurance known as sowkrah practiced in the Ottoman Empire:

"It is customary for merchants that when they hire ships from some harbi (a non-Muslim of a non-Muslim country), then in addition to freight charges an additional specified amount is paid to enable the harbi to arrange with another harbi the safe transportation of the cargo. The harbi who peacefully resides in the Islamic country acts as agent responsible for shipping of cargo. If the cargo suffers some loss as a result of fire, ship-wreck, or piracy, then the (harbi) agent makes good the loss in lieu of the fees paid (earlier for this purpose)"[7].

 Later on the Ottoman Maritime Code of 1863 and the Ottoman Law of Insurance 1874 gave statutory shape to the marine and non-life insurance respectively. The recognition given to the non-life insurance was under the belief that only the life-insurance concept clashed with Islamic principles and thus was haram[8].

III. Insurance in Arab World

Colonization brought modern insurance to the-Islamic world. Gradually in about a century's time insurance became generally available in the whole of the Arab world. It was not due to any popular or general acceptance of modern insurance by the Muslims who continued to reject it but because of the efforts of the western business interests to extend the facility of insurance to the Muslim world in order to cover their various risks. The generality of Muslims continued to remain aloof from insurance.

This fact is borne out by the statistics provided by an Arab insurance expert in a recent study[9]. According to him, although insurance business commenced in the Arab world in the late 19th century, yet by 1982 there were only 466 insurance companies (160 domestic and 306 foreign branch offices) in this region compared with 12,723 companies in the rest of the world. Compared with countries in the third world, the 466 of the Arab world are far behind Latin America's 1061 and Asian countries 769. Details may be seen in Tables I and II below:

,                                                            Table I[10]

Note   :  The   10,146   private   domestic   insurance   companies operating world-wide have 2,580 foreign branch offices.

Table II[11]

Though latest figures are not available, yet a fair estimation of the very poor showing of insurance in the Arab world may be had with the help of figures for direct income from premium for the six years 1974 to 1979. The sum total of life insurance, premiums

collected in the whole of Arab world during 1979 came to US $157.4 million. The corresponding figure for the rest of the world was US $15,200 billion, that is, a thousand times more than the Arab world.[12]

The fastest growth is recorded in marine and motor insurance. but it may be because generally in these areas insurance cover is a statutory requirement. However, "life insurance continues to be the least developed of all classes.[13]"

As already noted above, the reason behind this negative attitude of Muslims towards insurance has been their objection that modern insurance-operation involves riba, un-Islamic trading, in things that are haram, gharar (uncertainty) and maisir (speculation).