Second: Commercial Insurance
Definition: It is a contract by which one party—the insurer—undertakes to pay the other party—the insured—an agreed-upon monetary compensation when the specified peril occurs and the loss described in the policy is realized. This is in return for a fee called the "insurance premium," which the insured pays as stipulated in the policy. Thus the two contracting parties are:
– The insurer: a company or institution.
– The insured: the one who pays the premiums.
Its ruling:
Shaykh Muḥammad b. Ibrāhīm Āl al-Shaykh said: “Insurance is at odds with Islamic law because it contains the following elements:
- Gharar (excessive uncertainty), ignorance, and risk, amounting to the unlawful consumption of people’s wealth.
- It resembles maysir (gambling) because it necessarily involves wagering.
“In short, anyone who reflects on this contract will realize that it does not correspond to any of the contracts recognized by the Sharia. The mutual consent of the two parties carries no weight unless their transaction rests on a foundation of Sharʿī justice.”
Decision of the Council of Senior Scholars regarding commercial insurance:
The Council of Senior Scholars issued Decision no. 55 dated 4/4/1397 AH on commercial insurance. The text is lengthy, so I shall cite only selected excerpts; the reader may consult the full decision. It states:
First: The commercial insurance contract is one of the financial, social exchange contracts that contain excessive gharar, and the Prophet (peace and blessings be upon him) forbade transactions involving gharar.
Second: It is a form of gambling, for it contains risk in financial exchanges, liability without wrongdoing, and profit without consideration—or with consideration that is