Contents:
- Medical Video: Takaful- Islamic Vs Conventional Insurance: Lesson - 2
- What is Islamic insurance?
- The term usually used in Islamic insurance
- What is the difference between Islamic insurance and conventional insurance in general?
- 1. The concept used
- 2. Risk management system
- 3. Sharia supervisory board
- 4. Agreement system
- 5. Fund management
- 6. Status of ownership of funds
- 7. Distribution of profits
- He said, Sharia Insurance Is Fair. Why?
- So, which insurance should you choose?
Medical Video: Takaful- Islamic Vs Conventional Insurance: Lesson - 2
Every insurance product generally has a variety of services and advantages, which distinguishes it from other insurance. Unfortunately, there are still many pros and cons related to the insurance system that makes users have to think twice before choosing a type of insurance. In order to answer the people's demand, now many insurance companies are starting to develop Islamic insurance products that carry halal rules in accordance with sharia provisions.
Actually, what is meant by Islamic insurance and what distinguishes it from other insurance? The following review will answer it for you.
What is Islamic insurance?
Literally, sharia means something based on Islamic law. So, it can be said that Islamic insurance is insurance that adheres to sharia principles by avoiding gharar (uncertainty), maysir (gambling), usury (interest), and other immoral acts which are prohibited in Islam.
Islamic insurance has quite different rules, where funds collected will be managed according to sharia principles and aim to help and protect each other among participants.
In the concept of sharia insurance, insurance companies only act as operational managers and fund collectors that are distributed by the participants only.
The term usually used in Islamic insurance
There are several differences in terms used in sharia-based insurance, including:
- Contract, is a written agreement that contains certain agreements (rights and obligations) of all parties concerned.
- Tabarru Funds', is a collection of funds from the contributions of the participants in accordance with the tabarru 'agreement that has been agreed upon.
- Akad tabarru‘, Is a form of funding from participants with the aim of mutual assistance, which is not commercial.
- Wakak contract, is giving the company the power of attorney as the participant's representative to manage the tabaru funds.
- Mudharabah agreement, is a system of revenue sharing from tabarru 'funds that has been collected.
What is the difference between Islamic insurance and conventional insurance in general?
Because sharia-based insurance adheres to a different system, there will certainly be a clear difference between Islamic insurance and conventional insurance. The following are the basic differences between the two insurance companies:
1. The concept used
Islamic insurance carries the concept of cooperation from the participants to help each other, guarantee, and protect. You do this by issuing tabarru funds, or more commonly known as social funds, by sticking to the tabarru contract.
While in conventional insurance, insurance companies will set a premium that must be paid by participants each month individually. The goal, as a form of protection if one day the participants experience disaster.
2. Risk management system
Sharia-based insurance applies the principle sharing of risk. That is, there is a process of mutual bearing and helping between participants one and the other.
While conventional insurance holds the principle transfer of risk, namely the risk of an accident or an unexpected event can only be borne by each individual itself.
3. Sharia supervisory board
All Islamic finance industries, including insurance, have a sharia supervisory board (DPS) whose job is to guarantee that all current transactions are in accordance with sharia principles. Of course, the position of the DPS is not in conventional insurance.
4. Agreement system
Sharia-based insurance uses Tabarru akad 'which is based on the sharia system, so it is guaranteed halal. Unlike conventional insurance with a system that tends to be more of a sale and purchase agreement.
5. Fund management
Fund management in sharia-based insurance is transparent, and is intended to reap benefits for insurance participants. The portion of the distribution of funds is also quite clear at the outset, for example, how much is the portion for participants and how much will be left as ujrah (wages) for the company.
This is different from conventional insurance which all funds from participants are fully managed by the company, with the aim of generating profits for the company.
6. Status of ownership of funds
All funds paid in sharia-based insurance are the property of all participants. Here, insurance companies only act as fund managers.
Unlike conventional insurance, all premiums paid have belonged to the company. In other words, insurance companies have full authority over the management and allocation of insurance funds.
7. Distribution of profits
Profit in sharia-based insurance is not the entire company, but will be shared equally with all insurance participants. While in conventional insurance, all profits generated will belong to the company.
He said, Sharia Insurance Is Fair. Why?
Sharia-based insurance is often considered to be fairer, both for participants and companies, because there is no party that receives profits with a much greater amount than the other party. On the other hand, conventional insurance applies a sale and purchase contract, while sharia insurance tends towards helping help between insurance participants.
In short, sharia-based insurance does not apply transfer of risk (risk buying and selling) from the participant to the insurance company. In the case oftransfer of risk, the insurance usually will put the "portion" of risk into the insurance package so that it can be borne through paying premiums.
Whereas in sharia insurance, the existing risks have become a shared responsibility with the principle of mutual assistance so that they feel more equitable.
So, which insurance should you choose?
If examined more deeply, the most obvious difference between conventional insurance and sharia is the management system of funds distributed by participants.
For example, sharia-based insurance carries more benefits for its users, while conventional insurance still considers the portion of profits for the company. Although basically, these two insurance companies prioritize protection for all insurance participants.
Actually, the best choice for a type of insurance depends on you and your thoughts. Both conventional and sharia insurance, there are disadvantages and strengths of each that you must consider carefully before actually choosing the best insurance.
