Fatwa: # 42910
Category: Business Matters
Date: 8th August 2019


Why are Saudi Arabia Insurance schemes permissible and not those from other countries?


Assalamu alaikum Mufti Sahab,

I am working in Saudi Arabia and I was looking how Insurances are allowed in Saudi Arabia while same is not permitted in most of the countries including India. When I was looking in BUPA Arabia sharia advisor “Sharia Review Bureau” I found you on the list of advisors from South Africa. I also found that here in Saudi arabia the prmisiion is because it is cooperative insurance and else were including India it is commercial insurance. I could not find much difference in Insurance system here and in India therefore still there remains questions in mind. Hence, I request you to answer what are those conditions inn which it is allowed and what are those due to which is not permitted.


In the Name of Allah, the Most Gracious, the Most Merciful.

As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh.

Brother in Islam,

You enquire about the Cooperative insurance companies based in Saudi Arabia. Furthermore, you ask why the insurance companies in India are deemed impermissible whilst the insurance companies in Saudi Arabia are seen as permissible. Hereunder is a brief answer to your question:

Cooperative bank (also known as Al-tameen al-ta’awuni or the Takaful System) is a Shariah approved alternative to conventional insurance system. It is an Islamic system of mutual insurance built around the concept of donation, social solidarity, cooperation and with the intention to help the party holder in bad time. This is different from the conventional insurance which is based on interest, gambling and uncertainty (Gharar). There are several other factors which distinguishes a cooperative insurance scheme from a conventional insurance but due to its intricacies and complexities we prefer not getting into more details. Furthermore, Takaful system may work on a number of ways and failing to abide by any of its conditions will render the insurance haram. It frequently happens that an insurance scheme is displayed as Shariah compliant, however upon inspection the fact proves to be otherwise. The differences are at times so minute that a layman may not be able to understand them. Therefore, a Muslim should be extremely cautious while intending to take part in such schemes and should thereby consult with the local Ulama for their guidance. Just because an insurance company displays its scheme as Shariah compliant and is based in a Muslim country does not necessarily make it Shariah compliant.

Having said that, we would like to inform you that my respected Ustadh, Mufti Ebrahim Desai Sahib, is not amongst the advisory board members of the Shariah Review Bureau. We are unaware of the framework according to which BUPA works. Hence, we cannot comment on its Shar’i status.

In order for us to comment on the shariah compliancy of cooperate insurance schemes and how they are different from the schemes in India, we require the specific insurance model you are referring to and a copy of its contract for us to analyse. You may send the details of the insurance scheme to admin@daruliftaa.net for further clarification. Ref: Naved Akhtar.

And Allah Ta’āla Knows Best

Naved Akhtar ibn Shabbir.

Student - Darul Iftaa

Shillong, India. 

Checked and Approved by,

Mufti Ebrahim Desai.

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