ISRA Thematic Workshop 2009 – Insurable Interest in Takaful
Kuala Lumpur – March 12, 2009, Quality Hotel KL, In an attempt to bring together selected experts in the Takaful industry, comprising of Shari`ah scholars and practitioners, ISRA organized its first Takaful Thematic Workshop on the 12th March 2009 to deliberate on the issue of Insurable Interest in Takaful.
The objective of workshop is to analyze the application of the concept of insurable interest in the Takaful industry and diagnose the Shari`ah issues that arise from it.
There were two papers presented. The first paper “Insurable Interest in Takaful Practices: An Analysis” presented by Nusaibah Mohd Parid of ISRA, discussed the origin of the concept of insurable interest and its application in the Takaful industry. Defining insurable interest as the relationship between the participant and the subject matter covered, Nusaibah analyzed three situations where insurable interest would be scrutinized – property, own life and other people’s life. She suggested that there are no Shariah issues in property Takaful as there is actual financial damages suffered by the participant while in covering one’s own life, the heir gets compensated for the death of the participant. She highlighted that Shari`ah issues may arise in the third situation, when Takaful cover other’s life. Can one benefit from the death of others? For example, can a father (participant) benefit from the death of his child (person covered)?
To answer this question, Nusaibah then scrutinized the actual underlying contracts that are utilized in Takaful operation to determine if the contracts allow the participant to benefit from other’s life. She suggested that insurable interest alone is not sufficient to allow the participant to claim for compensation. It must be complemented with financial loss. Then only the participant may enjoy the Takaful benefit with the least Shari`ah apprehension.
After the first paper presentation, Associate Prof. Dr. Younes Soualhi from the Kulliyah of Islamic Revealed Knowledge, International Islamic University Malaysia (IIUM) gave his comments on the paper. He noted that the paper has a made a good link between the underlying contracts in Takaful operation and the concept of insurable interest. He also suggested that the industry should strive to explore more unilateral contracts to facilitate product development. Nonetheless he raised a concern for the floor to discuss further – must there be a financial loss in order for the participant to benefit from the Takaful? He’s of the view that this is not necessarily so because loss may not be limited to financial losses only. The floor member then gave their views on the subject. Nusaibah wrapped up her presentation by sharing an alternative model of Takaful based on Wadi`ah and Tabarru’.
In sum, the delegates agreed that there is a need to develop a Shari`ah parameter for insurable interest in Takaful. In determining the parties, three groups of people need to be considered – the participant, the person covered and also the beneficiary. Shall we expand the concept of insurable interest to the beneficiary as well i.e. the nominee? Shall the losses be limited to financial losses or shall we consider other dimension of losses as well. If we were to consider other dimension of losses, how can we implement it? These are some issues that will need future research.