Mar 12 - 18, 2007

Woody Allen is a very accomplished personality. In addition to being the husband of Mia Farrow, he is also a celebrated author, humorist, movie director, actor and a wit. In one of his movies, one of the characters is accorded a punishment worse than death. For punishment the character is locked in a room without any windows, with an insurance salesman. What a punishment!

Is there any lining of truth to this humorous story?

Universally, selling insurance is considered to be a tough task. The insurance itself, though something beneficial to the society, is perceived to have a tinge of abhorrence. Why is so?

Venturing a guess, say it feeds on our inherent fear of morbid aspect of future and that is not pleasant for the ordinary mortal. It reminds us of possible impending doom and end of life, a bitter possibility that we may not like to face. In words of Hafeez of Jallundher, "I will never believe, death is so close by, for I am so young!!!" Invariably the insurance salesman has to make a hard sell. As a result he has to sound like a broken record and be labeled as a nuisance.

In a country like Pakistan, the task of selling insurance becomes even more difficult. The religious and social background is alien to the concept of conventional insurance. There are lot of opinions from religious scholars denouncing the conventional insurance for its attributes, which according to Shariah scholars equates conventional insurance to gambling. It is, they believe, like someone betting on the odds that a certain misfortune may befall the beneficiary of the insurance contract. The motive of the insurance companies undoubtedly is to make money.

Consequently, the insurance penetration in Pakistan is abysmal. There is a cross section of society which not only stays away from Insurance, but on other hand believes it an active form of duty to resist it.

Is there a need for insurance? Life is like the eastern philosophy of Ying & Yang. It is made of light and shadows. Life never does move in a linear fashion. There are inevitable ups and downs. According to Hazrat Ali, the uncertainty of life, is but a pointer towards the Almighty, for it is He Who is the ultimate decider in our lives!! There are times when misfortunes befall the individuals and the community at large seemingly out of nowhere.

The individual and the community have to be prepared for a possible downturn of events. There is a small parable which is very telling. The incident as described is, when a man came to the holy prophet, peace be upon him and said that he had left his camel in the care of Allah. The Holy Prophet told him to tie the camel's leg and then depend on Allah for security. The first steps have to be taken by the person. The individual and the community have to take steps, safeguarding a possible down turn in events or for a possible misfortune.

If the individual and the community is not prepared to face the calamity it would be disastrous. What is the hapless individual or the hapless community to do? They have to stick together and face the misfortune together. And, this is the very nature or definition of Islamic concept of Insurance, which is called Takaful.

The word Takaful has its origin in the word Kifala, or the concept of taking care of... In this concept of insurance the individuals and the community come together to take care of their problems. It is a kind of solidarity. The motive behind is not to benefit from anyone's misfortune or to bet on the odds that a particular misfortune may take place or not, but on other hand, it is that of extending a helping hand, of a goodwill that may exist in a society, a solidarity that may hold the families together. This concept easily bypasses the abhorrent aspects of conventional insurance in its premise.

I came across a rudimentary form of the same concept in Nigeria where a family may set up Takaful for educating its young. The way it works is like this. Each earning member contributes a certain amount to a pool made for the same purpose. The head of the family, the patriarch, makes the distribution, based on the need and desire of the young in the family. When the young people getting the benefit get educated and are earning they also become a contributing member to the pool.

In Pakistan the same concept has also been employed in informal manner by some communities, such as the transporters who indemnify each other for possible losses as they may occur.

How does the Takaful differ from the conventional insurance? Is it not the same old wine in new bottles? The answer is that it does differ from the conventional insurance in concept. It is regulated by Shariah. The contributions as made by the party seeking insurance are not premiums but donations. This way it avoids the elements of Gharar (uncertainty), Maisir (gambling) and Riba (interest). This way it becomes acceptable to Shariah.

Another important aspect is the Investments which are made by the Takaful company. Whereas the conventional insurance companies can invest funds in interest bearing assets, the Takaful company is not permitted to do the same. It has to abide by the Shariah and avoid any such investments. Additionally, the investments have to be acceptable by Shariah.

Did this kind of insurance ever exist before in times of the Holy Prophet and soon after? The historians tell us that the concept was practiced at the dawn of Islam. It was used to provide for the blood money. It was also used actively in times of Hazrat Umer to secure the trading convoys when they would venture North out of familiar sands of Mecca and Medina

Has the concept been successfully employed in our current times? The answer is yes, it has been. Takaful companies are active in Asia Pacific countries of Malaysia, Indonesia. It is also been used in Middle East and in African countries such as Sudan. A Takaful company has even been established in Sri Lanka, which is mainly a Budhist country. In Pakistan Pak Kuwait has taken the lead to enter the field of Takaful Insurance.

Is this being used today any where in the world? The answer is yes. Takaful today has come in its own. There are Takaful companies in Far East and Middle East which are providing these products. Even Sri Lanka has a Takaful Company. Will the idea take root in Pakistan?

Coming back to the original question, will it be more acceptable to average buyer of insurance? The answer is that it avoids the abhorrent aspects of conventional insurance where some one is trying to benefit from one's fear of uncertainty. It has some inherently appealing aspects which would liken it to the masses. It is expected that in time Takaful activity will grow considerably in Pakistan. Hopefully the scenario outlined by Woody Allen will not be applicable in Pakistan.