Sharia insurance is a system where the participants share the risks by donating (infaq) part or the entire contribution through the tabarru’ that will be used to pay the claim, in case an accident occurs to one or some of the participants. The company’s role in this case is only as the fiduciary company to manage and invest the tabarru’ collected from participants’ contribution. The company is responsible only for the operational management of the funds and not as the underwriter as commonly found in conventional insurance.
Some of the akad that are used in the Sharia insurance are:
- Akad Tabarru’ is used among participants where participants provided a grant in the form of contribution (premium) through tabarru’ that will be used to help other participants who suffer a misfortune. The insurance company in this case only serves to manage the grant.
- Akad Tijarah or Akad among Participants (collectively or individually) with the insurance company with commercial goals.
- Akad Wakalah Bil Ujrah is used as the basis for participants to trust the management of their funds to the insurance company, it is a Tijarah Akad that provides power to the company as the participants’ trustee to manage the Tabarru’ and/or participants’ investment, in accordance with the power or authority provided in return for a Ujrah (fee).
- Akad Mudharabah is used for investment management, it is a Tijarah Akad that grant the power to the company as the mudharib to manage Tabarru’ investment funds and/or participants’ investment funds, in accordance with the power or authority granted in return for a revenue share (nisbah) with an amount that has been initially agreed.