Please contribute generously in order to ensure the continuity of our website InshaAllah.
I am an employee in a government-run company. My question is whether the health insurance offered by my company is permissible. It can be summed up in the following two points:
1. It is a financial fund that is called “the health insurance fund”. It is supervised by a committee that pays compensation to employees after they submit the medical prescription showing the amount paid by the employee to the doctor.
2. The income for the fund comes from two sources:
(i) the company’s contribution to the fund, which represents approximately 80% of the fund’s income and is taken from the annual profits of the company;
(ii) contributions in the form of deductions from employees’ salaries, which represents approximately 20% of the fund’s income. The amount of 1000 Dinars (approximately equivalent to 3 Riyals) is deducted from the salary of an unmarried worker, and 3000 Dinars is deducted from the salary of a married worker, after submitting an application to the supervising committee of the fund to include his family in his health insurance.
3. Joining the health insurance program is voluntary for both unmarried and married employees.
4. Compensation paid to the employee may be greater than the value of the monthly subscription fee; the payout to employees during one month may vary from one person to another, depending on whether he sees a doctor, because not all people fall sick in the same month. Hence some may benefit from compensation whilst others do not.
5. In the event that an employee does not benefit from this compensation, the amount deducted from his salary is not refundable, either at the end of the year or at retirement.
6. Any surplus at the end of the year is carried forward to the following year and remains in the fund, and the new annual income is added to it.
7. The company does not deal with any insurance company.
Is this health insurance regarded as cooperative insurance and is it permissible to subscribe to it?
Praise be to Allah.
The most important difference between cooperative insurance and commercial insurance is that the money deducted for cooperative insurance is not owned by the committee that is administering the fund; rather it remains a donation that is to be spent on whoever meets the conditions.
In contrast, the administrators of commercial health insurance funds have ownership of the subscriptions and deductibles paid by the subscribers, and that is included in their personal accounts, in return for the administration committee being committed to treat anyone who meets the conditions. There is a big difference between the two types.
Al-Bukhari included it in a chapter entitled: “Chapter on sharing food and other resources, and how to divide that which may be weighed or measured handful by handful (without weighing it or measuring it), because the Muslims did not see anything wrong with sharing out provisions when traveling so that one could come and have some, and another could come and have some…”
Differences between lawful and forbidden cooperative health insurance
There are other essential differences between cooperative health insurance to which it is permissible to subscribe, and that forbidden type of insurance which is based on gambling. It is essential to investigate these differences before issuing a fatwa ruling that any specific case is lawful or prohibited.
It says in Al-Ma`ayir Ash-Shar‘iyyah (p. 372-373):
The reason why cooperative insurance is permissible and commercial insurance is forbidden is the following essential differences:
We know that many of these differences are not relevant when speaking about the fund mentioned in the question, but we have quoted them here so that the reader may understand the real and important differences between cooperative insurance which is permissible, and commercial insurance which is forbidden, and thus will be able to weigh up and judge other types of governmental health insurance funds.
In order to issue a precise Fatwa concerning your fund and to try to help you to follow the Shar`i guidelines on cooperative insurance, it is essential that you send us the official documents which regulate the work of the fund, and the contracts that subscribers have to sign, so that we can study them and determine the ruling on them. Although we think it most likely that the way your fund is operated is sound, in sha Allah, we cannot be certain of the ruling before examining the official rules and regulations governing the fund, and the application forms for joining it.
The book Al-Ma`ayir Ash-Shar`iyyah stipulates a number of basic matters which must be stated in the articles of association of cooperative funds, as it says (p. 364):
“Islamic insurance is an agreement among people who are exposed to a particular danger to deal with any harm resulting from this danger, by paying subscriptions in the form of a commitment to donate; from that a fund is formed that is a separate, financially independent, virtual entity, from which compensation is paid for harm that may befall one of the subscribers because of some danger against which he was insured, in accordance with the bylaws and contracts. The administration of this fund is handled by a committee chosen from among the policyholders or by a limited liability company in return for a fee paid to administer the insurance and invest the money in the fund.
As for traditional insurance, it is a financial transaction that is aimed at making profits from the insurance itself, subject to the rulings on financial transactions that may be affected by ambiguity; the ruling on traditional insurance is that it is forbidden according to Shari`ah (because of the ambiguity it involves).
Islamic insurance is based upon the following Shar`i guidelines and principles, which must be stated clearly in the company’s articles of association:
All of these matters should be paid attention to in the bylaws that regulate the activities of the insurance fund, especially those that invest these subscriptions of the people insured for the benefit of the fund. It is essential to ensure that these principles are present in the bylaws and articles of association governing the insurance.
And Allah knows best.