By Jesse Reitberger, CIM | Halal Insurance Inc. | Winnipeg, Canada
Here is something I have never once heard mentioned in an online debate about whether insurance is haram.
The concept of cooperative financial protection (insurance), people pooling resources to help one another in times of hardship, was something that was practiced during the time of the Prophet Muhammad ﷺ. So, tnext time someone tells you that insurance is a Western invention incompatible with Islam, you can tell them the history. Because the history tells a very different story.
Diyya: First Life Insurance EVER!
The story begins with diyya — blood money.
Simply put, Diyya is blood money. Islam understands that there is a financial value in someone being alive and fully able bodied which is why there are specific amounts of money that MUST be paid if someone is killed or seriously harmed so that the victim’s family does not in a devastating manner. Modern Day Life Insurance, Disability Insurance and Critical Illness insurance all do something similar in assigning a financial value to someone’s life, health and being able bodied. And no, it’s not because a should is worth X amount of dollars, it’s because we understand that our life, health and able body gives us the ability to earn. This was understood during the Seerah as well.
What the Scholars Say About This Connection
This historical connection between Al-Aqila and modern insurance is not a fringe observation. It is the basis on which serious Islamic scholars have built their permissibility arguments for centuries.
Dr. Mustafa Al-Zarqa sees insurance not as a simple contract, but as a contractual system based on mutual compensation and from the viewpoint of scholars who permit it, this contract is deemed permissible by analogy (qiyas) to the concept of Al-Aqila.
The International Islamic Fiqh Academy, one of the most authoritative Islamic scholarly bodies in the world, has formally recognized this connection. The Academy stated that given the fact that Al-Aqila’s foundation is based on mutual support and solidarity, it is permissible to resort, when necessary, to alternative arrangements including Islamic insurance (cooperative or takaful insurance) in which the rules include bearing financial obligations due on the insured.
What This Means for Canadian Muslims
There is no widely accessible formal Takaful market in Canada. The cooperative insurance structures that exist in Malaysia, the Gulf, and parts of Europe have not been replicated here in a form that Canadian Muslim families can easily access. However, the mutual and cooperative insurance companies we work with at Halal Insurance Inc. Foresters Financial, Equitable Life, UV Insurance, Humania, Beneva and Assumption Life operate on similar fundamental principles as Al-Aqila:
- Policyholders pool their contributions
- Risk is shared across the community of members
- No external shareholders extract profit from that pool
- Surplus is returned to members
Is this a perfect Takaful structure? No. and we are transparent about that. These are not formally Shariah-certified products and we say so clearly. But they embody the same spirit of cooperative mutual protection that the Prophet ﷺ approved in Al-Aqila.
Food For Thought
The next time you hear that insurance is a Western concept incompatible with Islam, remember Al-Aqila.
Remember that the Aqila was a group collectively liable for blood money payments on behalf of a member an institution that evolved from pre-Islamic custom into an institution of the Shari’a itself, remaining a concern of contemporary Muslim scholars to this day. Remember that the Prophet ﷺ approved a system of pooled community contributions to protect families from sudden financial loss.
Remember that the Quran commands cooperation in righteousness, and that protecting your family from financial devastation when you are gone is among the most righteous acts of provision a Muslim can make.
You are not doing something foreign when you protect your family through halal-structured insurance.
