Motor insurance in line with the principles of Islamic finance is now being introduced in the United Kingdom and may be popular with motorists beyond the Muslim belt alone, according to a UK newspaper.
"First it was Islamic current accounts, then mortgages and investment funds, and now we have a motor insurance product that conforms to Islamic law, or Shariah.
"This move will be welcomed by many of the two million British Muslims looking to buy insurance cover aligned with their faith.
But it could also prove popular for non-Muslims who find the notion of an ethical or co-operative insurance product appealing," The Independent reported.
Unlike conventional insurance, where risk is transferred from the policyholder to the insurance company, halal (permissable) insurance, or takaful ("guaranteeing each other"), requires all participants to share risk equally, the newspaper reported. Instead of premiums, participants pay contributions which, as with ordinary insurance, are calculated on the presumed risk of the individual and how likely they are to claim. These contributions are then pooled in a takaful fund, which is invested in strictly halal activities.
There is also a Shariah Supervisory Committee, made up of Shariah scholars, to oversee all activities and to ensure that the whole process is consistent with Islamic principles, it noted.
Interestingly, according to the paper, once the fund has been used to pay for any valid claims, any surplus money is redistributed to participants at the end of the year in the form of discounted premiums, which come in addition to any no-claims bonuses.
"What is unique is the ethical nature of what we do," says Bradley Brandon-Cross, the chief executive of Salaam Halal Insurance. "It's a transparent process and the opportunity to get something back is attractive to customers, both Muslims and non-Muslims alike."
(This story appeared in The Malaysian Reserve on Feb 23, 2009. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on Islamic finance on Mondays, edited by Habhajan Singh) Any source
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