The curious case of insurance: Is it really gambling the way Islamic Finance claims?

Disclaimer: The views expressed in this blog are not necessarily those of the blog writer and his affiliations and are for informational purposes only.

Insurance is often seen as a form of gambling and many argue that insurance is prohibited in Islam due to its association with gambling.

But is this really the case? Is insurance really gambling?

Well, at least the authors of this book (Principles of Risk Management and Insurance) argue it is not and there are some important differences between the two.

Gambling is a speculative activity where the outcome is uncertain, while insurance is a risk management tool that helps to protect against known risks.

Here are two key differences between insurance and gambling presented by the authors:

• Insurance is a way to transfer risk.?When you buy insurance, you are essentially transferring the risk of a loss to the insurance company. This means that if you do experience a loss, you will be compensated by the insurance company. In gambling, on the other hand, you are taking on the risk of a loss. If you lose, you will not be compensated. Insurance handles an already existing pure risk (like a house getting burned due to fire), while gambling creates a new speculative risk (like by betting, creating a new risk of losing money).
• Insurance is a socially productive activity.?When you buy insurance, you are helping to create a pool of money that can be used to help people who have experienced a loss. This can help to protect people from financial hardship and can also help to promote economic stability. Gambling, on the other hand, is often seen as a socially unproductive activity because it can lead to addiction and financial problems.

So, is insurance gambling?

What can be the argument for Islamic finance to claim insurance is gambling and thus cannot be Shariah-compliant?

What do you think?

Do you believe that insurance is gambling? Why or why not? Share your thoughts in the comments below.

Hint:

Is someone betting on future uncertainties?

• #insurance
• #gambling
• #riskmanagement
• #islamicfinance
• #shariahcompliant
• #financialliteracy
• #personalfinance
• #takaful
• #islamicbanking