Adil Salahi’s name is not new to the permanent readers of the ‘Arab News‘ daily from Saudi Arabia. His articles as well as his answers to the readers’ questions about Islamic issues are read with interest and trust in him. He is regarded as the scholar whose approach to Shariah is most logical and scientific. His books have earned recognition from the contemporary Arab Ulema. He is one of those very few scholars who never stick obstinately to their point of view but are flexible, have courage to retrieve if they are presented with evidences from the Quran and Ahadith.

His argument over the Life insurance subject is worth mentioning here. He was against the Life insurance, had written against it initially in some issues of Arab News’s Friday column. Mr. Ishaq Khan, the then director of an insurance company CCI in Saudi Arabia, approached him with authentic argument in the light of Shariah on this subject. Mr. Adil Salahi not only retrieved from his earlier stand on life insurance, but also wrote several articles to guide readers. His honest approach to the issue is highly appreciable. Readers will find many answers to their doubts in the following correspondence between the two gentlemen.

Mr. Ishaq Khan’s letter to Mr. Adil Salahi.
(Arab News dated September 17, 1988):

Sir,
There are a number of points which make life insurance easier to judge as forbidden. It is a policy which is supposed to provide financial protection to the family of a person when he dies. The very fact that death is determined by Allah and that a believer accepts whatever comes by Allah’s will make such an arrangement unacceptable.

Following this approach, will it be correct to say that any financial provisions to a person’s family consequent to his death would contradict acceptance of Allah’s will? As is well known, in most countries the amount is paid in the form of insurance, or blood money or social security or donations to the family of the diseased as a help to solve the financial problems caused due to the death or the disability of the head of the family. I shudder to think of Islam prohibiting such noble provisions.

This idea of acceptance of Allah’s will in an extremely fatalistic manner was in evidence the other day: A young engineer was insisting that we must accept whatever happens by Allah’s will, and the point under discussion was whether the people of Jeddah should “enjoy” the summer heat as “decreed” by Allah or they could remorselessly take recourse to air-conditioning? Take an example of medical treatment, some people still regard that taking medicine is against their religion; if such absurd notions were to be endorsed by Islamic scholars, life would become horrifyingly miserable.

I have been in insurance for 37 years and have studied it rather thoroughly. As a humble Muslim, I am convinced that this is a great humanitarian concept and it needs to be studied by Islamic scholars without traditional bias. It is a duty they owe to the community.

In the context, it may interest your readers to know that a “Muslim India Insurance Company” was founded in Lahore in 1934 under the life chairmanship of Dr. Mohammad Iqbal, the great philosopher poet of Islam. He had become its Chairman not for the profit. His interest was limited to just one share of four Rupees. He used to even sign the Life Insurance policies issued by the company at the initial stage.
(The copy of the policy can be seen on the back cover of this book signed by him on 25th May, 1935).

Earlier in 1932, a well known Muslim thinker and leader, the late Mr. Abdul Rahman Siddiqui established the Eastern Federal Union Insurance Company in Calcutta with the active support of the heads of prominent Muslim Indian states like the Nizam of Hyderabad, the Nawab of Bhopal and the Aga Khan III. The ventures were initiated with the blessings of a number of Islamic scholars of the day for the amelioration of the deteriorating economic condition of the Muslims.

There is no doubt that the insurance as practised today is not entirely free from certain objectionable features but they should not be viewed in isolation. They are essentially a reflection of the spiritual decay all over the world. When we look around we find some people living a life of extreme extravagance in ludicrous luxury and they go about parading their pride and possessions in woefully ugly ways. In the market place one comes across businessmen who flagrantly charge exorbitant prices or ignobly indulge in hoarding and black marketing. Yet another worldwide curse is the expenditure of enormous amounts on the prohibitively priced jewellery, perfumes, cosmetics and the like.
And to top it all, we find widespread corruption and bribery particularly in the Muslim countries. It is a frightful situation and only an all out and concerted effort by our leaders and the scholars can create a climate of God consciousness which alone can help people give up transgression against divine law for their own salvation.

The guidance you are giving to the readers of Arab News is laudable and I pray that Almighty Allah bestows his blessings upon you for painstakingly educating people on all matters of life and living in the light of the Quran and the Sunnah.

— M. Ishaq Khan, Jeddah

Mr. Adil Salahi’s reply was published in Arab News dated March 12, 1990 under “The legitimacy of Insurance” as follows:

About 18 months ago, I wrote an answer encouraging a reader to stop his Life Insurance policy. In so doing, I followed the line adopted by the Fiqh Council of the Muslim World League. Within a short period of time, I was taken to task by two readers who found my argument unconvincing. Mr. M. Ishaq Khan and Mr. Hashmi have been working in the field of insurance for a number of years and have provided me with a few points about insurance policies and why they believe them to be Islamically acceptable.

This has prompted me to study the question of insurance at a great depth and I discussed the subject with a number of scholars and referred to much that has been written on it. I have also received a number of questions on insurance and I am discussing the subject at length hoping that this comprehensive answer will serve as answer to every reader who has put to me a question on insurance. I am grateful to Mr. Khan and Mr. Hashmi for the information they have given me which was of benefit in arriving at the conclusion I am now explaining.

An insurance policy is a contract which aims at providing compensation for potential loss or damages that are specified in the contract. The insured pays premiums. Should the loss occur, the insured makes the claim.
There is no doubt that the objective of insurance is sound, legitimate and wins the approval of Islam. It seeks to reduce or redress the effects of a natural or man-made disasters. Hence, it is in effect a regularisation of the cooperation which is required to be shown by the Muslim community when unfortunate circumstances befall its members. For an insurance company to extend such a service and make it available to a large number of people requires a great deal of managerial and administrative work. It has to employ a sufficient work force to look after various aspects of its work and it has to have offices, stationery, equipment etc. To do all this and to make profit as a result is perfectly legitimate.

From the above we conclude that the concept of insurance is sound and its organisation through an insurance company is acceptable. Hence, there is nothing wrong in principle in seeking insurance cover against potential risks that a person may run with regard to himself, his property or his business.

Having said that, I must point that many legitimate or permissible things can be used for unacceptable purposes. When this happens, we pronounce something as forbidden, not because it is sinful in nature, but because of its usage for the wrong purpose. It is important, therefore, to look at how insurance works in practice and to try to find out why many scholars remain opposed to it.

Is it Gambling?
One of the objections which are frequently raised suggests that the insurance is a form of gambling. It has been suggested that insurance companies determine premiums on the same principles and rules which are used by the gambling companies in quoting prices. It may be so, but the use of mathematical rules and principles for a forbidden purpose does not make it forbidden to use them for a legitimate purpose. Moreover, the gambling is totally different from the insurance.
The Gambling is a moral evil, which has very adverse affects on the gambler and his family. A gambler may lose all his fortune in one unlucky night in a casino. There is only one winner in gambling who is the owner of the casino or the betting shop. All their clients are losers.
Moreover, a gambler always lives in fear of losing all his wealth. His family runs the risk of total loss. In insurance, it is completely opposite. The insured has the peace of mind derived from the knowledge that should a catastrophe take place, he will be indemnified. Moreover, the benefits in the insurance are mutual. All those who take insurance policies as well as the insurance company benefit by the insurance scheme.

Is it betting?
Another objection suggests that the insurance is a form of betting. The insured person pays his premium and hopes for the best. If nothing happens to him he simply loses his premium. In the same way as a betting person loses his bet.
There is a big difference between the two. When a person plays a bet, he hopes to win because that win will give him a net income. A person taking insurance cover pays his money for security. He prefers that nothing happens to him or to his property which would require him to make a claim against the insurance company. He prefers safety for himself and for his property. If something happens, and he has to make use of his policy, he simply gets a reduction in the losses he has suffered.
Take for example, a person who has insured his house contents against theft but burglars break in and get away with much of his valuables. He will probably receive the value of what he has lost. But he would have to lose time in buying replacements. Moreover, some of the valuables may have a sentimental value, which he can never replace.

Is it against Allah’s will?
Some people have suggested that an insurance policy represents a challenge to Allah’s will. A good believer, it is argued, accepts whatever calamity befalls him as an act of Allah and submits to Allah’s will in all circumstances. While this is certainly true of a good believer, an insurance policy does not attempt to prevent Allah’s will. Indeed, nobody and no one can challenge Allah’s will. By taking an insurance policy, a person only seeks to reduce the effects of destiny, not to prevent it.
Sheikh Mustafa Azzarqa, Professor of Islamic Law, likens the insurance to the iron bars placed on top of a building to divert a thunderbolt away from it. When the architect places these iron bars, the thought of preventing the thunderbolt happening does not occur to him at all. He is only trying to save the building in which he has put so much effort from being destroyed by it. This he achieves through diverting its direction, taking it deep underground.

Is it “Gharar”?
A more serious objection is that which groups insurance with sales in which risk is a basic element. These are known in Islamic law as “Gharar” sale. Examples of such deals are to sell whatever a pregnant animal will produce before it is actually born, or to sell whatever will be caught in a fisherman’s net, or whatever a pearl diver will bring up in his next dive, or to sell the fruits of the trees at the beginning of the season when their quality and the quantity can not be established yet. All such sales are forbidden in Islam, because they involve a risk to the buyers and there may be an element of deception on the part of the seller. It is also forbidden to sell an unidentified object as in the case of when someone sells a sheep from a flock without specifying or identifying it.
When we consider this particular aspect, we find that Islam has outlawed deals, which involve an exceptional or a serious element of risk. If we were to say that the deal, which has even the slightest element of risk is forbidden, then we will block most business deals. This is in no way the intention of Islam behind forbidding sales. When the risk element is of normal or reasonable proportions, a deal may go through. In insurance, what a person buys when he seeks a life insurance cover is not the amount of compensation he will receive when something happens to him or to his property. What he buys is “peace of mind”. This is a tangible return for the money he pays. Once the cover is extended, the insured has this peace of mind which, to him, is a fair return on his investment. If something happens to him, he is compensated and his loss is redeemed. If nothing happens, he is happier because he does not have to contend with any misfortune.

Is insurance fully based on interest?
Some people have raised another objection saying that the insurance companies invest their money in usury, or get interest on funds that are available to them. If so, then the action of the insurance companies is unacceptable from the Islamic point of view. This, however, does not affect the system of insurance itself. It relates only to that portion of the business of the company which has an element of usury. We cannot forbid insurance as a whole on the basis of what some or most of the insurance companies do. We simply say that their action on their part is forbidden. If we find an insurance company which invests its money in an Islamically acceptable way, there is no reason not to use its services.
On the basis of the forgoing, it can be said without hesitation that the insurance is permissible from the Islamic point of view, because it seeks to achieve a legitimate purpose of compensating the insured for any losses he may suffer, through distributing the risks to all those who have insurance policies. While losses may occur to a small percentage of people taking insurance cover and paying premiums, the majority will not have to bear any losses. However, everyone who takes an insurance policy receives something in return, namely, peace of mind which is what he is after.

Is life insurance a “Life Guarantee”?
(Arab news dated March 16, 1990 under life guarantee or life insurance)

Many scholars have tended to view the life policy with a great deal of suspicion, assuming that the insurance company is guaranteeing that the insured person will survive throughout the period of the contract. If he dies, the company has lost the case and it must pay for its loss. In other words, the life policy is viewed in the same light as a bet undertaken by the insurance company. If the insured person dies, it has lost its bet and it must pay up. This is indeed a naïve understanding, caused most probably by the Arabic name given to the life policy which makes it a life guarantee rather than a life insurance.

The fact is that the company does not guarantee anyone to live even for few minutes after the contract has been made and the policy is enforced. No insurance company is foolish enough to guarantee life, when everybody realises that any human being can die at any moment as a result of a road accident, let alone an unexpected disaster.

What a life policy gives is some sort of security to the family of the insured person, in case of his death during the period of contract.

In almost all countries, the government operates a social security scheme and a retirement scheme which is applicable to its employees. Moreover, workers in factories and employees in the private sector are required by law in many countries to join the social security scheme, which is often operated by the state. In such schemes, a portion of the salary of the employee is deducted as a contribution to the scheme. It is often the case that the employer, whether a government department or a private company, must make contribution to the schemes on behalf of its employees. In cases of death or loss of ability to work, the scheme offers a pension to the employee or his family, after his death.

The same is true of the pension scheme operated in almost all the countries. After the end of a long period of service, an employee retires and receives a monthly payment known as his pension. If he dies, leaving behind his wife and young children, they are paid a pension which helps them meet life’s expenses. It is agreed by all the contemporary scholars that such schemes are permissible, and indeed encouraged by Islam. Islam does not accept that a person, who has spent his most productive years in the service, ends up with no income when he reaches the age of 60 or 65. Such an employee needs to have a regular income which is covered by the social security scheme or the pension he receives.

There is a strong similarity between the life insurance and such schemes. In the life insurance, the insured person is guarding his family against becoming destitute in case of his death. He pays premiums so that he receives the peace of mind which is associated with the knowledge that a handsome amount of money will be paid to his family. If the father of a young family takes out an insurance policy when he is, say, 30 years old giving him an insurance cover for 25 or 30 years, he immediately receives a fair return on his investment represented by the peace of mind, which he experiences as a result of the knowledge that his young family will be provided for, in case of his early death. If he lives throughout the period of insurance cover, he does not suffer a loss. His children are now grown up and probably working and earning. Some of them may have started their own families. There is nothing wrong with this arrangement.

Indeed, there are certain types of social securities, which Islam has set in operation. One of these is the contract of allegiance, which was used to be made between a new comer to Islam who enters into an agreement with a Muslim that the latter would pay him ransom money should he be guilty of an accidental killing, and the Muslim would inherit him if he dies heirless. In this contract, one party is insuring himself against the risk of committing accidental killing. In return, he is making the person who gives him that cover, his heir who inherits him.

There is also the Islamic requirement that the family of the person guilty of accidental killing should contribute to the ransom money he has to pay. This is a requirement which could be enforced by law. Moreover, Islam has given social security to insolvent debtors and to those who find themselves stranded with no money when they travel abroad. From all these forms, we realise that Islam is not against covering oneself against any potential risk. Considering the similarity between the purpose of an insurance policy and the pension scheme, it is safe to say that the insurance, including life insurance, is permissible.

There is also a different method of life insurance, which is linked to a saving scheme. The insurance company agrees to pay its client or to his family a sum of money which is called “the sum assured”. This sum becomes payable to the beneficiary of the life policy if the client dies at any time during the period of the policy, which could last for 20 or 30 years, according to the age of the client at the time when the policy is made. The premiums are determined by the sum assured. Over the period of the policy, the insured actually pays to the insurance company the same amount minus the interest which his premiums make over the same period.

If the sum assured is, say, 100,000 Riyals over a period of 20 years then the client pays to the insurance company something like 4000 Riyals every year throughout this period. The total amount he actually pays will come to 80,000 Riyals and the interest the company receives on these premiums is passed on to the client. After the deduction of the company’s administration costs, such a policy could also have an element of payment of profits to the client. This profit represents the client’s share of what the insurance company may make on its investment of the client’s premiums in different projects. If the client dies within the period of the policy, which is 20 years, his family is paid 100,000 Riyals in addition to any profits made by the company on investing his premiums. If he survives through the 20 years, and the policy matures, he will receive 100,000 Riyals plus his share of the profits, which could be twice or thrice of that figure. It is equally possible that the profits are only a small amount.

Insurance does carry usury – How to avoid?
There is no doubt that such type of life policy is forbidden, not because it is an insurance policy, but because of the element of usury which it incorporates. To render such a policy permissible from the Islamic point of view, the element of interest should be removed from it. If the company charges the client 4000 Riyals a year and insures him for 100,000 Riyals over a period of 20 years, considering the difference as its contribution, which it pays from the profits it makes through its activities, this is perfectly valid. If in addition to that, it pays its client a percentage of profits on his investment, then the responsibility of all clients is to make sure that the company invests its money in business activities, which are permissible in Islam. Once he does that, he may go ahead with this type of policy. To recap on this particular point, the saving type of life policy is forbidden if the payment of interest is involved. If no payment of interest is made, then it has the same ruling as the “Term” type of life policy, which is permissible. When the policy qualifies the client to receive the share of the profits, he must make sure that his money is invested in a legitimate way.

Conclusion :
I have made it clear that I have arrived at this conclusion after discussing the subject at length with a number of authorities on Islamic Fiqh and reading extensively on this subject. Now I have no doubt in my mind that for an individual to take an insurance policy on his life, or his business, or his house is perfectly acceptable from the Islamic point of view. I know that many scholars still give a different ruling, but I am certain that an increasing number of scholars tend to accept insurance as legitimate once they are aware of all its implications.