For a prolonged period of time, there has been a long of confusion existed among the Muslim community about utilisation of insurance in Islam and that confusion was aggravated further by the existent western traditional insurance that are in use. The reason behind this is because traditional insurance contains elements of riba (usury), gharar (uncertainty) and maisir (game of chance), which are restrictions that hindering traditional insurance to be acceptable in Islam.
Therefore, the Muslim community came up with takaful which is a cooperative and mutual scheme to assist each other as brethren in matters of catastrophe. The scheme was to be managed by a takaful operator and as such for the management of the scheme various models have been developed. These models included mudarabah (investor-entrepreneur), wakala (principal-agent) and waqf (endowment) along with their hybrids. The problem that rose is
that none of the models appear to be suitable or even to an extent Sharia compliant in them.
The models lack important components such as premium, risks, excess and compensation and the models tried to balance off by making it a mutual model. Unfortunately, the models does not appear to have been analysed from all prospective including advancement in the western community and thus, hampering economic development of the Islamic finance.
This lead to the Muslim community being in chaos and ended up with a situation, worse than it was previously. The Muslims not only, do not have an appropriate model to replace the traditional insurance but also, the takaful models that presently in existence are in conflict.
This is leading to a loss of confidence among Muslims and questioning about the validity of
insurance in itself under Islamic law. There is a significant cry in the air for an innovative
model which not only meets the Sharia requirements but also, help in advancement into the
developed western community for commercial advancement. The aim of this thesis has been
exactly that, in eliciting the concerns and creating the same for the assistance of not just the
Muslims but also the traditional insurance market e.g. marine insurance, to progress the same
and future development to bring the platforms closer.