The Islamic finance industry began to exist in Indonesia since the period 1990. And now after almost 30 years of serving the needs of the Muslim community, to what extent do people know the benefits of these sharia products?
Is it only in accordance with sharia and related to halal-haram? This is what we need to evaluate at this time.
One of the long-term financial products, namely insurance, is also increasingly serving sharia transaction schemes.
This product, apart from being in accordance with Islamic law, also offers many other benefits that will be provided to each of its customers.
In general, the “ core business” remains the same, namely risk protection, but the principles for running this business are different from conventional ones.
Sharia practice emphasizes the principle of mutual assistance between insurance customers and is not fully borne by insurance companies like conventional products.
In accordance with the fatwa of the National Sharia Council (DSN) no: 21 / DSN-MUI / X / 2001, concerning:
General Guidelines for Sharia Insurance, Islamic insurance is defined as an effort to protect and help each other between a number of people or parties through investment in the form of assets and assets. or tabarru ‘which provides a pattern of return to face certain risks through a sharia-compliant contract.
Like what are the other benefits of this sharia insurance product? The following reviews will provide a detailed review.
Sharia Insurance Is Fair, Why Is It?
In the practice of Islamic insurance, profit sharing is felt to be fairer because no party will receive a greater amount of profit than the other party.
Why is that? If conventional insurance applies a sale and purchase contract or so-called tabaduli, sharia insurance uses a takafuli contract or helps one customer to another when in trouble.
So in Islamic insurance there is risk sharing.
If conventional insurance uses a tabaduli contract, there is a sale and purchase of the insured risk between the customer and the insurance company.
In other words, there is a risk transferring from the customer to the insurance company.
In this position the insurance company becomes overwhelmed, so it tries to find ways to cover all risks by including the element of risk in the insurance package.
Whereas in sharia insurance, risk is a shared responsibility with the principle of helping each other so that it is fairer.
1. Sharia Has the Concept of Help
The principle of help in sharia insurance uses the concept of donations, so that when you buy sharia-based insurance, it means that you donate part of the funds to help other customers who are affected by disaster.
With a concept like this, no funds are lost as long as we invest. In a certain period, all the profits obtained will be divided equally between the two parties so that they both feel comfortable with safe funds.
2. Using the concept of risk transfer, not risk sharing , it’s more fair and profitable
Sharia general insurance uses the concept of risk sharing , whereas in conventional it uses risk transfer so that the insurance company as the insurance operator will not experience a loss, because the risk is not in the company.
The benefit for customers is that there is a collection of tabarru funds (such as premiums in conventional insurance) which are profitable, which can be benefited, when compared to conventional general insurance. This is what makes Islamic general insurance feel fairer.
3. Do not know the term forfeited funds because the concept is Custodian (Wadiah)
In conventional insurance we know the term forfeited money if you don’t pay the premium according to the minimum time requirements agreed at the beginning.
This does not happen to Islamic insurance because Islamic insurance customers can get their money back even though it is not yet due.
Sharia insurance uses the wadiah (deposit) concept, where funds will be returned from the participant’s account which has been separated from the tabarru ‘account.
The insurance policy holders bear the operational costs themselves, and even this is limited to only around 30% of the premium, which makes cash value formation quickly formed in the first year with a value of 70% of the premium.
In conventional insurance itself, this cost is fully borne by the policy holder.
This also provides another potential benefit that allows participants in general sharia insurance to receive a portion of the premium back if it turns out that until maturity there are no claims.
4. More Transparent, Why So?
Fund management in sharia general insurance uses a clear division concept at the beginning, for example, how much is the portion for the manager, while the portion for risk is divided by how many policyholders.
For example, the percentage for tabarru is 70%, while for ujroh is 30%. This is what distinguishes it from conventional, where 100% of companies own, with policy allocations according to each company, even though the goal is the same so that the community is guaranteed and protected.
5. There is no usury or other prohibitions
In Islamic financial transactions, there are several prohibitions that should not be done, such as usury, gharar (lack of clarity of funds) and maisir (gambling).
If you take a product from a sharia insurance company, the funds will be managed in a process that is in accordance with the initial approval, which is avoided from the prohibited transactions above.
For investment allocation, for example, the contract used is mudharabah, which is a cooperation contract in which the participant provides 100% of the capital, and is managed by the insurance company, by determining the production sharing contract.
What if there is a claim, where will the funds be taken from? If a sharia insurance customer submits a claim, the claim funds come from the tabarru ‘(benevolence) accounts of all participants.
In contrast to conventional insurance claims originating from the insurance company.
6. Supervised by the Shariah Supervisory Board to Guarantee Transactions in accordance with Shariah Principles
All Islamic finance industry, including insurance will be supervised by the Sharia Supervisory Board (DPS). Even every product that is issued must also receive prior approval from DPS to provide assurance of confidence for you and other customers in choosing insurance.
So people no longer need to argue about the halal-haram of sharia products because they have been monitored by experts.
Also Read: Understanding an Insurance Policy and How to Choose the Right Policy
Not only about Halal-Haram, Sharia insurance also has many other benefits in it
Understanding sharia insurance products will make you understand that this product is not only limited to halal and haram matters.
The initial concept of deposited funds, risk transfers and many other things in managing funds and risks in a sharia insurance product turns out to provide many benefits, not only for companies but also for participants in the sharia insurance program. So, this product could be an attractive alternative for you.