Sharia Insurance Fund Management Mechanism

Sharia insurance or also known as Takaful is an effort to protect each other and help each other among several people/parties through investments in the form of assets that provide a pattern of return to face certain risks through sharia-compliant contracts.


Sharia insurance uses the principle of risk sharing, where the risk of one party is borne by all parties who are policyholders, while conventional insurance uses a risk transfer system where the policyholder is transferred to the insurance company.


Premium management in conventional insurance is often unfair to policyholders, insurance companies often benefit. The company benefits from the ownership of the premiums paid as well as the surplus and investment.


The management of funds in investments with usury is also an unfair practice in conventional insurance. The following is an explanation of the elements of usury contained in the conventional insurance operational system.

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1. This is because the premiums received from insurance companies are invested in products containing usury, which is prohibited by sharia.

2. The exchange between the premium paid and the sum insured falls into the category of usury fadl, that is, the usury of exchanging similar goods with an unequal amount because there is likely to be an imbalance between the premium paid by the participant and the amount of the sum insured paid by the insurance company.

The provision of lost or forfeited funds for participants who do not continue to pay premiums during the period of the contract force insurance or resignation. This is a result of the transfer of ownership of funds from participants to companies by conventional insurance practices. All these only benefit the insurance company.

The mechanism of fund management in sharia insurance is very different from conventional insurance. In sharia insurance, insurance participants are the group that owns the entire premium fund (shahibul maal), and the insurance company acts as a guardian (mudharib) to manage the investment proceeds insurance fund which will then be divided between the insurance company and the insurance participant with the distribution of profits based on the agreed profit sharing (ratio). 

This mechanism is close to the element of justice that is highly promoted in the sharia system. The mechanism for fund management in sharia insurance is divided into two, namely the system for products that contain elements of savings and the system for products that do not contain elements of savings.

It can be said that the role of sharia insurance is to manage the operations and investments of part of the funds received from policyholders. In contrast to conventional insurance which acts as a risk insurer. The contract used in sharia insurance uses the principle of help between fellow policyholders and sharia insurance companies, while the contract used in conventional insurance is based on the principle of exchange (buying and selling).

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