Saudi Arabia could have been the best example of establishing interest free banking or insurance. It would have been the first country to become completely interest free country. No foreign bank would have been operating here. Saudi Arabia has successfully deployed many Shariah rules which cannot be imagined elsewhere in the world like:

Closing down the market five times a day; whether it is a big shopping mall or a small grocery in a far off village, the law enforcing bodies have proved that Shariah rule is possible to be applied.

In the same way, one cannot imagine of kidnapping, rape, robbery or murder as common as elsewhere in the world. The crime rate of Saudi Arabia is the lowest in the world.

It does not mean that the Shariah rule about interest is not possible to be applied. It means that there are obstacles in defining the interest therefore it is not possible to structurise the financial dealings without the element of ‘increment’ which the scholars call an interest. It is the integral part of any business. The function of the bank is not mainly the interest. The bank provides back bone to the economy system of any country. It performs thousands of functions. Not all of them are interest based. The interest or the commission is part of the business otherwise no bank can survive, so no economic system can prevail in any country.

To define the interest in its right perspective as it existed at the time of the revelation of the Quran, we have to go back and see what exact kind of interest it was. In fact, its two popular forms were prohibited:
1. The increment in borrowing or lending. Riba Al Duyun (debt usury)
2. The increment gained by the seller or the buyer if they exchanged goods of the same kind in different quantities, Riba al Fadl or Riba al buyu or Riba al Khafi (trade usury). The Prophet Mohammad (ﷺ) ordered to use money for the exchange of goods to avoid the Riba.

The life insurance is neither a contract of barrowing or lending money nor a trade of exchanging goods. It is a contract of guarantee of financial compensation in case of untimely death or accident, a saving useful in bad times and a protection in the old age.
The increment which comes after several years is nothing but to compensate the inflation rate. In the early Islamic days or even the days of Imam Abu Hanifa (رحمة الله عليه) or Imam Shaf’ai (رحمة الله عليه) and others, the inflation was neither existing nor imaginable. In the modern times inflation is so high that the value of money reduces to half in less than a decade.