Jurisprudential examination of the insurance contract (book)
- abstract
jurisprudential examination of the insurance contract (in persian: بررسی فقهی عقد بیمه) is a book written by naser niqkhu Amiri that explains and defines the insurance contract and examines reasons for its validity or invalidity from a jurisprudential point of view in four sections. An insurance contract is a contract in which individuals, by paying an insurance premium, entrust the responsibility for goods or capital or their life to another. This contract has found various types and forms in the contemporary era due to its extensive function in social life, and as a new contract, significant theoretical discussions in the works of contemporary jurists and lawyers have been devoted to it. In this book, the author has tried to prove the validity of the insurance contract from a jurisprudential point of view and to answer the questions related to it.
A brief outline of the book
The book Jurisprudential examination of the insurance contract, written by naser niqkhu Amiri, is a book on the jurisprudence of insurance, published through collaboration between the SAMT (The Organization for Researching and Composing University Textbooks in the Islamic Sciences and the Humanities) organization and Markaz-i Fiqhī-yi A’immi-yi Aṭhār. The author’s aim in this book is to explain the issue of the insurance contract in detail and to prove its validity in the Sharia from a jurisprudential point of view, as well as to answer the jurisprudential doubts and questions regarding the insurance contract.
Structure of the book
Contrary to the common practice, the book Jurisprudential examination of the insurance contract does not dedicate a separate chapter to the previous literature, method, questions and assumptions of the research; but it explains the issue of the insurance contract, proves its validity from a jurisprudential point of view, and answers the questions that have been addressed to it in four sections. The first section of the book is devoted to generalities and deals with the concept of insurance, its genesis and evolution, different types of insurance including cooperative, social, private and reinsurance, the basic principles of insurance as well as its fundamentals and characteristics. The second section of the book is dedicated to examining the validity of the insurance contract based on general jurisprudential evidence, and has studied the general rules of “اوفوا بالعقود” (fulfill obligations), “تجاره عن تراض” (trade by mutual consent) and “المومنون عند شروطهم” (believers are bound by their conditions) as rules that validate the insurance contract. In this section, the author also discusses the reasons for the validity of settlement (ṣulḥ) and its compliance with insurance. He also presents an argument based on the conduct of intellectuals. The third part of the book examines the validity of the insurance contract from the point of view of its compatibility with other special contracts, including the ji‘ala contract (contract of reward) and the gift and hire contracts. The author also seeks to confirm the validity of the insurance contract as a form of contractual guarantee through explaining the issue of guarantee and dividing it into the contractual and real categories. Finally, the fourth section of the book addresses the obstacles to validity of the insurance contract and the author has examined the occurrence of usury, gharar , gambling and conditionality in the contract as obstacles to validity.
Contents of the book
Contents of the Jurisprudential examination of the insurance contract book have been presented in one introduction and four sections. In the introduction, the author has pointed out the important position of a jurisprudential perspective and the importance of the insurance contract and has provided a brief explanation about the structure of the book.
Generalities and concepts
Definition of insurance and its history
After referring to the origin of the word بیمه (insurance) in Hindi or Urdu, the author defines it as follows, quoting from the Academy of Persian Language and Literature: An act through which people, by paying money, entrust the responsibility for goods or capital or their life to another and, in case of loss, the insurer must pay the amount of the loss (p. 10). He then defines the term insurance, based on the legal point of view, as such: Insurance is a contract in which the insurer undertakes to pay for what has happened to the policyholder in return for a certain amount, if the conditions are fulfilled or the specified time arrives (p. 11). In the next step, after expressing the preservation of human dignity, preservation of security and peace, altruism and foresight as the origins of insurance, and while not knowing the exact date of the origination of insurance, the author has introduced its initial forms among the people of China, Egypt and the Eastern Mediterranean and considers the first official insurance policy to be recorded in the 16th century, England. He then continues to discuss the emergence of the concept of insurance in Iran during the Qajar dynasty. Also, regarding the Islamic history, he mentions an agreement, called the Ḥilf al-Fuḍūl (league of the virtuous), as some sort of cooperative insurance in the early Islamic period (pp. 16-21).
Types of insurance
In the second chapter, cooperative, social and private insurances as well as reinsurance are explained. Cooperative insurance is based on cooperation and collaboration, and the membership of the insured and the insurer in one cooperative, the variable premium and the responsibility of all members of the cooperative toward the member who has experienced loss are among its characteristics (pp. 24 and 25). Also, social insurance is a provider of social benefits, and defining a specific insurance premium for everyone, participation of the government or the employer in paying insurance premiums, and compliance with the law (as opposed to private contracts) are among the characteristics of social insurance (pp. 26-28). The fourth type is reinsurance. This insurance is actually a type of indirect insurance that can be applied to the former types. In other words, whenever the insurer transfers its obligation to another legal or natural person as the second insurer, the insurance contract is considered as a reinsurance contract. This type of insurance is concluded when the amount pledged in the insurance contract is very high, and risk distribution, higher guarantee of greater capacity, and apportionment of profit and loss are among its benefits (pages 38 and 39).
Fundamentals of insurance
The four principles of good-will, insurance benefit, substitution and compensation are the fundamental principles of insurance. According to these principles, the insurance contract must be based on the good-will of the parties and must benefit the insured, and the insurer must be able to refer to the insured for compensation instead of the person responsible for the damage. Also, the fourth principle conveys the meaning that what the insured undertakes for the insurer is to compensate for the damage; therefore, there must be a causal relationship between the occurrence of the accident and the damage (pp. 41-45).
The bases and characteristics of insurance
The creation of the insurance contract, the parties to the contract, the object of the contract and the consideration are the bases of the insurance contract. Also, the characteristics of the insurance contract are: 1- The necessity of an insurance contract based on which none of the parties have the right to unilaterally cancel the agreement. 2- Its imposition, which indicates the predetermined conditions in the law. 3- Probability and randomness of the insurance, which means the dependence of compensation on the occurrence of an accident. 4- Consensuality of the insurance in the sense that it does not require notary registration and special formalities. 5- Being reciprocal or having consideration and equivalent. 6- Independence from other contracts. 7- Conditionality of insurance, which means its dependence upon the occurrence of an accident or the expiration of a certain period of time (p. 54-46).
The validity of insurance based on the general evidence
اوفوا بالعقود (fulfill obligations)
After quoting words of jurists, the author states that fulfilling obligations means adherence to the requirements, and the word العقود in this verse includes all covenants. He has also written that the Lawmaker’s rules regarding transactions act as ratifications and has pointed out that the الـ in العقود means that it refers to all contracts. Then he considers the necessity of fulfilling contracts that are common in every period, including the insurance contract in the contemporary period, as what is signified by اوفوا, and thus, he proves the validity of the insurance contract in the Sharia (p. 70). However, it seems that the general inclusion and non-inclusion in question depend on the semantic domain of العقود and are not related to the signification of اوفوا.
تجاره عن تراض (trade by mutual consent)
In the second chapter, the implication of the general Quranic statement تجاره عن تراض about the validity of the insurance contract has been studied. After explaining the vocabulary of the verse and its implication about the forbiddance of obtaining wealth unlawfully and also excluding a trade that is conducted with consent of the parties, the author writes that the word تجاره in the mentioned general statement includes the insurance contract and, in general, it includes any type of exchange and contract concluded for a rational benefit (p. 80).
المومنون عند شروطهم (believers are bound by their conditions)
The author has mentioned two ṣaḥīḥ (reliable) hadiths and two Muvaththaq (authentic) hadiths which include the phrase المومنون عند شروطهم and has written that their credibility has great fame. Also, after stating that the word المومنون is a plural noun which refers to all believers in general, he says that شرط (condition) means obligation and commitment, whether as part of a contract or not. Therefore, although the mentioned provisions have been stated in the form of a news report, since it is conveying the issued ruling, it implies the necessity of fulfilling obligations. Also, considering that the word شرط (condition) is used in hadiths in the meaning of absolute commitment, the primary conditions are also required to be fulfilled. Therefore, the insurance contract, as a rational contract, has to be fulfilled and does not need to be concluded within another contract (p. 89).
Generalities of the enforcement of settlement
In the fourth chapter, the author has proved validity of the insurance contract in the Sharia through comparing it with settlement or compromise (ṣulḥ). Beside quoting the statements of jurists, he considers settlement as a contract whose provisions include agreement and peace and states that although legislation has allowed such a contract with the aim of ending conflicts, it is not exclusive to disputes; rather, a contract of settlement is valid and binding even without a precedent dispute. The author continues to explain that a settlement is independent from other contracts and then, about the compatibility of an insurance contract with a contract of settlement, writes that if what is agreed upon in an insurance contract is an instance of agreement and peace, the concluded contract will be a contract of settlement; however, if there is no agreement and peace, but another contract is concluded with the aim of securing damages, it will not be an instance of a contract of settlement. Nevertheless, it is possible to conclude an insurance contract within a contract of settlement; as Sayyid Kāẓim Yazdī (author of ‘Urvat al-Vuthqā) who does not consider the insurance contract to be valid in the Sharia, considers its conclusion within a contract of settlement to be valid and binding (p. 98).
Conduct of intellectuals
In the fifth chapter, after explaining the conduct of intellectuals, the author explains the difference between intellect and the conduct of intellectuals and states that the rulings of intellect arise from real interests and harms, while the conduct of intellectuals arises from intellectual rules which have been shaped based on regulating livelihood and the daily life (p. 107). In the next step and in response to the question of whether the conduct of intellectuals requires approval of the Lawmaker to be valid or intellectual conducts are valid even without approval of the Lawmaker, he mentions three viewpoints. The firs point of view considers validity of the conduct of intellectuals to be inherent, like validity of the intellect. In contrast, the second view considers conduct of intellectuals to be valid only as long as it has not been rejected and prohibited by the Lawmaker. The third standpoint goes further to believe that it is not enough for the validity of the conduct of intellectuals to be not rejected and prohibited by the Lawmaker; rather, the Lawmaker’s approval of and consent about that conduct must be verified (pp. 109-112). Then, beside critiquing the first standpoint, the author states that the insurance contract is valid as a rational contract, since it has not been rejected and prohibited by the Lawmaker.
Validity of insurance based on special evidence
The third part of the book examines validity of the insurance contract through comparing it with the ji‘ala (contract of reward), gift and hire contracts, as well as with contractual guarantee. Based on the author’s explanation, the insurance contract can conform to ji‘ala as the creation of the obligation to pay a certain consideration (insurance premium) for a certain action (payment of compensation) (p. 121). Also a conditional gift, as definite possession of the very property, in return for the payment of consideration or the performance of a certain act can be compatible with the insurance contract, in which case the insured will donate the amount of the insurance premium to the insurer provided that it compensates for the loss (p. 130). In the explanation on the compatibility of insurance with guarantee, by dividing guarantee into the real and contractual categories and expanding the contractual guarantee, the author adapts insurance to the expanded contractual guarantee, by which, although at the time of concluding the insurance the responsibility for the debt is not upon the insured, the insurer is the guarantor of any possible loss (p. 138). Also, through adapting insurance to the rental contract, ownership of the commitment to compensate for any damage is transferred to the insured by the insurer in return for the insurance premium (as a wage), or the insured hires the insurance company in return for the payment of the insurance premium to undertake to compensate for the damage (p. 144).
Barriers to validity of insurance
Entailing usury
In the life insurance contract, the insured pays an amount as an insurance premium to the insurance company, so that after his death or the expiration of a certain period, the insurance company pays a larger amount to the heirs or beneficiaries of the insurance. Therefore, some consider life insurance to require usurious loans and thus to be null and void (p. 164). The author has answered this problem and states that the amount of the insurance premium is not paid to the company as a loan, so the said contract is not usurious and is valid.
Entailing gharar
In the insurance contract, the payment of compensation is contingent and pending upon the occurrence of the accident. Also, the amount of compensation is not certain when concluding the contract. Therefore, some consider insurance as a kind transaction that entails gharar (threat, deceit or uncertainty), which has unknown consequences, and thus believe it to be null and void (p. 167). In response to this problem, the author states that in the insurance contract, the insurance premium is not paid in return for the cost of the probable damage, rather, this amount is paid for the insurer’s commitment to compensate for the damage. Therefore, in this contract, the consideration and equivalent are definite and specific and this contract does not entail gharar (p. 179).
Entailing gambling
Some Sunni jurists consider the insurance contract to be similar to gambling because it is associated with the risk of profit and loss and causes laziness and, thus, they consider it invalid (pp. 185-189). In response to this problem, the author has stated that firstly, gambling is realized with special devices and in a game, while the insurance contract is not considered a type of game. Secondly, the insurance contract is a kind of rational transaction that is concluded with the aim of protecting security and has nothing to do with gambling, which is not compensatory and rational (p. 190).
Condition in the contract
In the insurance contract, the payment of damages is not definite, but is pending upon the occurrence of the accident during the agreed time. Therefore, some have considered the insurance contract to be conditional and invalid (p. 200). In response to this question, the author states that a condition that harms the validity of the contract is a genetic condition, which means when the realization of the pillars of the contract depends on the realization of a genetic matter. This is while in the insurance contract, the pillars are unconditional and known and the condition is only about the requirements of the intention to create [the contract], which does not harm the validity of the contract (p. 201).
Published critiques
The article, A Critique of the Book ‘A Jurisprudential Study of the Insurance Contract, written by Majid Muhammadi, has been published with a critical approach to this book in the seventh issue of the A Critique of the Book Fiqh and Law quarterly. In this article, after stating some strengths of the book, such as use of reliable sources and logical order of chapters, he has pointed to editing problems and ambiguity in the explanation of some discussions as the book’s weaknesses. See the text of the article here.