Conventional Insurance
Permissibility of buying conventional insurance policies
Conventional commercial insurance is impermissible as it combines three prohibited elements: riba (interest on investment of premiums), gharar (uncertainty over what will be received), and maysir (gambling-like structure where one party gains at another's expense).
Full Ruling
The OIC Fiqh Academy confirmed the prohibition of conventional commercial insurance on the grounds that: (1) Insurance premiums are invested in riba-bearing instruments. (2) The contract involves gharar fahish: the insured pays premiums without knowing what (if anything) they will receive in return. (3) The structure resembles maysir (gambling) — the insurer profits if no claim is made, while the insured profits only if loss occurs. The Academy recommended the cooperative takaful model as the Islamic alternative.
Rationale & Reasoning
Classical scholars traditionally prohibited all forms of commercial insurance. The three prohibited elements (riba, gharar, maysir) are individually sufficient for prohibition; their combined presence makes the prohibition unambiguous.
Rule Basis (Daleel)
- 01Prohibition of riba in investment of premiums
- 02Prohibition of gharar fahish in commercial contracts
- 03Prohibition of maysir (gambling)
- 04OIC Resolution 52/2/6
Citations & Sources
OIC Fiqh Academy Resolution No. 52/2/6 – Insurance
OIC International Islamic Fiqh Academy · 1990
Ref: 52/2/6