Today, insurance is something that has become a basic need for most people, especially those who live in urban areas. As the target market for insurance, of course, here you need to be careful in sorting out which insurance products can really provide the most profitable benefits for you and your family.
One of the insurance products that is currently being discussed and is quite popularly used by Indonesian Muslims is sharia insurance. To find out more about Islamic insurance and how it differs from conventional insurance, you need to read the following summary.
So what is the difference between Islamic insurance and conventional insurance?
As stated by the National Sharia Council, sharia insurance here is a form of mutual assistance and an effort to protect each other between a number of people by carrying out an investment process which here is in the form of social funds.
Sharia insurance will later provide returns through the form of an engagement or also called a contract against certain risks that may be experienced in the future using Islamic Sharia. There are several differences between Islamic insurance and conventional insurance.
These differences include:
1. Basic Principles
The basic principles between conventional insurance and Sharia insurance tend to be different. In Islamic insurance, the principle of coverage for risk is shared between the policyholder and the insurance company. This principle is also known as risk sharing or risk sharing
The policyholders will later help each other in collecting grant funds in the form of efforts that will be used to bear the risk. This is different from conventional insurance, where all risk coverage will later be delegated to the insurance company.
2. Agreement or Akad
The next point that distinguishes between conventional and sharia insurance lies in the type of contract or agreement. The contract contained in sharia insurance is based on efforts to help each other.
The insurance participants will work together to help one of the policyholders who is experiencing risk. This is different from conventional insurance, where the form of the agreement is a sale and purchase agreement. In this case the insurer and the policy holders consciously make a transaction.
3. Fund Management
In sharia insurance, the process of managing funds will be carried out transparently in accordance with state law and applicable Islamic law by prioritizing benefits for participants from insurance. The insurance company here only serves as the fund manager.
Conventional insurance companies will determine the amount of premiums that need to be paid by themselves without any intervention from other policyholders. In addition, they will determine how the consideration of cost transfer is in accordance with the main objectives and types of insurance products in order to benefit the company.
4. Profit Sharing
In this type of sharia insurance, the distribution of profits or profits obtained by the company related to insurance activities will be distributed evenly among all members of the insurance. This is different from conventional insurance companies, they will obtain ownership rights for the profits obtained related to funds from their customers’ insurance.
5. Scorched Fund
Another difference lies in the term for this forfeited fund. In the conventional insurance system, if the funds are not claimed within a predetermined period of time, the funds will be forfeited. The forfeited funds do not apply to sharia insurance. In this insurance, the premiums that have been paid can still be claimed later and in general the funds will be cut a little as social funds or tabarru funds.
In 2001 the Indonesian Ulema Council began to issue a fatwa regarding sharia insurance guidelines. The fatwa states that efforts to overcome future risks need to be prepared from the start.
What are the Fatwas of the Indonesian Ulema Council?
This means that insurance is a necessity in providing protection from risks that may occur at any time. The fatwa from the Indonesian Ulema Council includes, among others:
• Elements of Kindness and Help
The fatwa from the MUI emphasizes that sharia insurance needs to have an element of kindness and mutual assistance among insurance members. The help is in the form of collecting social funds that are truly in accordance with applicable Islamic law.
• Insurance is a Form of Protection
Risk is one of the things that cannot be predicted when it will come. Therefore, one form of anticipation that you can do to deal with these risks is to prepare an emergency fund. Sharia insurance can provide this form of protection.
In sharia insurance, the profits and risks received must be divided equally among all participants. According to the MUI itself, this is considered fair, because insurance should not be carried out just to earn profit.
• Insurance is part of Muamalah
Humans as social beings will always coexist and need other humans. The Indonesian Ulema Council is of the opinion that insurance is a form of social relations, also known as muamalah. This is because insurance is carried out between two or more people. Of course it must be based on Islamic law.