The Movement of Shariah Insurance in Indonesia
Louisa Sutanto

Indonesia is widely known as a country which the majority of its population is Muslims. However, the development of Shariah (Islamic Law) products has just begun starting around the year 2000. One of these Shariah products is the Shariah insurance which was pioneered by PT. Syarikat Takaful Indonesia. The company was established in 1994 and since then, other insurance companies with Shariah basis and/or having Shariah divisions started to increase in numbers in Indonesia. But what do these Shariah insurance companies do and how are they different from the conventional insurance companies? Is this type of Shariah product another threat to Indonesian plurality?

Insurance: Is It Islamic?

Before we go into a deeper discussion on Shariah insurance, we first must take a look at some considerations that make purchasing insurance is in such accordance with the Muslims’ belief. It is never mentioned in the Qur’an about the law to obtain insurance policy and therefore sometimes it creates question among the Muslims themselves, “Is it Islamic to buy insurance?” Some Muslims may say that people who buy insurance policy are just the same as not trusting Allah with their lives. However, Allah had commanded in the Qur’an, Surah Al-Hashr: 18, “O ye who believe! Fear Allah, and let every soul look to what (provision) He has sent forth for the morrow. Yea, fear Allah, for Allah is well-acquainted with (all) that ye do,” which means that humans need to prepare and make plans for their futures.

In another part of the Qur’an, there is also a story about Nabi Yusuf (Joseph) during his stay in Egypt, Surah Yusuf: 43-49. The story tells us that through the King of Egypt’s dream, Joseph was able to predict that Egypt would be covered with 7 years of prosperity, but then another 7 years of hardship and famine. Thus, during the first 7 years, Joseph ordered the Egyptians to save their crops so that when the time of hardship and famine came, they would be prepared. Many Muslims believe that this story is analogous to the concept of insurance where humans try to protect themselves from any unfortunate events in the future, i.e: accidents, deaths, or property losses. Therefore, Muslims view the concept of insurance to be Islamic.

It is also interesting to know that this familiar story of Joseph in the Qur’an has also become the Biblical base for the same question that the Christians have on purchasing insurance.

Shariah Insurance vs. Conventional Insurance

Having known that the general concept of insurance is in accordance with Islamic worldview, the next question that arises from the Muslims is that whether the insurance today (conventional insurance) has fulfilled the entire Islamic concept (Shariah) of insurance.

Shariah insurance and conventional insurance essentially share a common purpose which is risk management. However, the basic difference between the two is in the way that they manage the risk. In the conventional insurance, the coordination for risk management is in the form of risk transfer from the insured to the insurer. Meanwhile, Shariah insurance holds the principle of helping each other by sharing the risk among the insurance participants (risk sharing).

The general concept of risk sharing in Indonesia’s Shariah insurance is regulated under fatwa Majelis Ulama Indonesia (MUI) No. 21/DSN-MUI/X/2001. According to the fatwa, there are two principle clauses about the mandatory contract agreements (akad) in a Shariah insurance policy: akad tabarru and akad tijarah.

Akad tabarru is all types of contract that involve non-profit transactions. It is mainly intended for goodness and helping one another (social-oriented). Thus, the party whose main intention is to do goodness is not allowed to ask anything in return from the other party. The reward in akad tabarru will only come from Allah.

In Shariah insurance, akad tabarru is a mean to collect fund for insurance participants via premium payments. The participants’ premium payments can be allocated into a tabarru fund account or a saving account. The premium payments that are in the tabarru fund account must be initially intended to help other participants who experience losses. On the other hand, the premium payments in the saving account will become savings for the participants which can be retracted with additional profit sharing (bagi hasil) when there is no claim.

Another type of contract regulating the concept of risk sharing in Shariah insurance is akad tijarah. Akad tijarah is basically a commercial contract which involves profitable transactions. This contract is based on a principle in business that says, “Business is an activity for profit”.

Furthermore, by having these two types of contract in Shariah insurance, there are two principles in Islamic jurisprudence (Fiqh) that entail the conditions of akad tabarru and akad tijarah:

1. Akad tabarru cannot be changed into akad tijarah It means that the parties involved in the transaction that has the original intention of doing non-profit transaction cannot expect any kinds of future profit because gaining future profit is considered as riba (interest). Muslims deem that it is a sin to act in contradictory with the real definition of the akad.

2. Akad tijarah can be changed into akad tabarru It means that it is permissible to change profitable transaction into tabarru (without any additional profit) if it is to serve the purpose of giving aid (i.e: financially) to the other party.

Aside from akad tabarru and akad tijarah, there are some other basic concepts that Muslims cannot have in Shariah products which are Gharar (uncertainty), Maisir (gambling), and Riba (interest).

1. Gharar (Uncertainty) What is not allowed in Islam is the exchange of a transaction with others on something that contains uncertainty or Gharar. In conventional insurance, the premium is calculated based on the age of the insured. According to the Islamic view, this method of calculating premium creates Gharar because the age of one person is the mystery of Allah. It is all up to Allah to decide when a person will die.

2. Maisir (Gambling) Where there is a serious Gharar in a contract, Maisir (gambling or speculation) will naturally exist. Gambling is against the basic principles of justice, equity, fairness, ethics and morality, which are obligatory values within Islam. Insurable interest, the utmost of good faith and indemnity doctrines within conventional insurance are not enough to eliminate a speculative (gambling) attitude from either side of the insured and insurer.

3. Riba (Interest) The ribawi elements mentioned by the prophet Muhammad are gold for gold, silver for silver, wheat for wheat, barley for barley, dates for dates, and salt for salt. Money is similar to gold and silver; it is a modern way of exchange. Therefore a contract of exchange between the insurer and insured contains a ribawi element, i.e: levels of compensation involving varying amounts and time scales.

Shariah Insurance in Indonesia

On February 24, 1994, the first Shariah insurance company was established. PT. Syarikat Takaful Indonesia was founded by TEPATI (Tim Pembentukan Asuransi Takaful Indonesia) whose members were the Indonesian Association of Muslim Intellectuals, ICMI (Ikatan Cendekiawan Muslim Indonesia), Yayasan Abdi Bangsa, Bank Muamalat Indonesia Tbk., PT Asuransi Jiwa Tugu Mandiri, Indonesia’s Department of Finance, and a number of Indonesian Muslim businessmen.

Later in the same year, PT. Syarikat Takaful Indonesia strengthens its existence by establishing another Shariah insurance company, PT. Asuransi Takaful Umum, on August 25, 1994. And on June 2, 1995, PT. Asuransi Takaful Keluarga was also founded by the same company.

By the year 2007, there were already a large number of conventional insurance companies that have established Shariah units/divisions within their companies. Some prominent conventional insurance companies that have Shariah divisions are Prudential, Allianz Life Indonesia, AIA Indonesia, Mega Life, and Sinarmas.

According to Jens Reisch, CEO of PT Asuransi Allianz Life, Indonesia, the reason why his company wants to establish a Shariah division is simply due to the fact of its customers’ high demand of the Shariah insurance products. Allianz believes that the customers are attracted by the community principle that Islamic financial products represent. Reisch also mentions that even though the general market share of Shariah insurance is still below 1% but it grew by 28% in 2005. Allianz Indonesia expects that Shariah-compliant insurance will have a market share of 20% in 20 years.*

With this kind of expectation, it should be no surprise that the number of insurance companies with Shariah products keep increasing year by year.

No		Description		2002		2003		2004		2005		2006
1		Shariah Life Insurance Company		2		2		2		2		2
2		Shariah Property and Casualty Insurance Company		1		1		1		1		1
3		Life Insurance Company with Shariah Branch Offices		1		2		3		8		9
4		Property and Casualty Insurance Company with Shariah Branch Offices		1		6		11		13		15
5		Reinsurance Company with Shariah Branch Offices		0		0		1		2		3
		Total		5		11		18		26		30

Source: Biro Peransuransian Badan Pengawas Pasar Modal dan Lembaga Keuangan Departemen Keuangan RI

The Future of Shariah Insurance in Indonesia

According to the President of Indonesia Shariah Insurance Association (Asosiasi Asuransi Syariah Indonesia), Muhaimin Iqbal, the premium returns of Indonesia Shariah insurance was less than 2% of the GDP as of September 2007. However, Iqbal predicted that the growth of this industry’s premium will exceed 1,000 billion Rupiah in the year 2008. It is also expected that more giant insurance companies will enter the Shariah insurance market and will help to achieve the 1,000 billion Rupiah total premium target.

Similar positive response was given by the General Manager of Insight Investment Management, Iggi H Achsien. He said that the rapid development of Shariah insurance in Indonesia makes total sense. Shariah insurance promises a fairer, more transparent, and non-gambling system. Thus, knowing that Indonesia is a big target market for Shariah products and also the system’s transparency, it will definitely make the policyholders feel more secure.

With this advantage of having more security in hand, it is also not surprising to see many insurance companies in Indonesia try to expand their promotions of Shariah products to the Non-Muslims. Shariah insurance is not created exclusively for the Muslims. Every Non-Muslim is welcomed to consider Shariah insurance as an option for future protection. A success story of this strategy of promotion can be seen at one Shariah insurance company in Malaysia, called Prudential BSN Takaful BHd (PruBSN). This company is trying to strengthen its position in Shariah insurance market for Non-Muslims by implementing world-class standard of promotions and services. The recent statistic shows that the Non-Muslims client in PruBSN is around 35% of its total clients. The CEO of PruBSN, Mohamad Salihuddin Ahmad says, “We will continuously educate the public that Shariah insurance does not only belong to the Muslims.” And this success of PruBSN Malaysia to promote Shariah Insurance drives PT. Prudential Life Indonesia to follow the same path.

Conclusion

The existence of Shariah insurance in the economic world of Indonesia has created a new perspective on how Indonesians ought to do business. Being transparent and social-oriented, Shariah insurance manages to emphasize the importance of trust in a business transaction. It even creates the possibility in the future of regaining trust from other countries about Indonesia and thus can help to rebuild our deteriorated economic system.

Another point to consider is that taking from a Christian perspective, the idea and concept proposed by Shariah insurance actually have nothing against the Christian belief because its end goal is to protect and to help one another. Our past experience with other Shariah products, such as RUU APP, or local regulation (Peraturan Daerah) that contains Islamic Law have made us continuously think that the enforcement of Shariah is only for the benefit of the Muslims and crushing the interests of the minority. Sometimes, we also need to see things beyond the surface. As Jesus showed compassion to the Samaritan woman who did not have the complete picture about God, then it is also our responsibilities as Christians to be open-minded and also show compassion to others who are of different worldviews.

Jesus declared, “Believe me, woman, a time is coming when you will worship the Father neither on this mountain nor in Jerusalem. You Samaritans worship what you do not know; we worship what we do know, for salvation is from the Jews. Yet a time is coming and has now come when the true worshipers will worship the Father in spirit and truth, for they are the kind of worshipers the Father seeks. God is spirit, and his worshipers must worship in spirit and in truth.”– John 4: 21-24

Work Cited

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[2.] Ali, Yusuf. “Qur’an Yusuf: 43-49.” Qur’an Arabic – English Translation. 6 September 2008 <http://www.mysticletters.com/quran-viewer/arabic-yusuf-ali/12.php>

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[4.] “Islamic Products Have Tremendous Growth Rates.” 24 January 2006. Allianz Group Asia Pacific. 11 October 2008 <http://www.allianz.com/en/allianz_group/press_center/news/business_news/life_and_health/news_2006-01-24.html>

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[7.] “Mengenal Akad Tabarru.” 9 April 2008. Pkesinteraktif Kantor Berita Ekonomi Syariah. 11 October 2008 <http://www.pkesinteraktif.com/content/view/934/907/lang,id/>

[8.] “Mengenal Konsep Dasar Asuransi Syariah.” 2003. Sinar Harapan. 6 September 2008 <http://www.sinarharapan.co.id/ekonomi/eureka/2004/0416/eur1.html>

[9.] “Pedoman Umum Asuransi Syariah.” 17 October 2001. Komisi Infokom MUI. 21 September 2008 <http://www.mui.or.id/mui_in/product_2/fatwa.php?id=28&pg=2>

[10.] “Perkembangan Asuransi Syariah 2008.” 6 August 2008. Asuransi Takaful. 20 September 2008 <http://asuransitakaful.co.cc/2008/08/06/perkembangan-asuransi-syariah-2008/>

[11.] Purwantohadi, “Akad Transaksi Dalam Islam.” 2 July 2008. Islamic Zone. 11 October 2008 <http://purwantohadi.multiply.com/journal/item/57/Akad_Transaksi_Dalam_Islam>

[12.] “Sekilas Takaful Indonesia.” Takaful Indonesia. 6 September 2008 <http://takaful.com/index.php/profile/action/list/>

[13.] “Should a Christian Get Insurance?” Got Questions?org. 6 September 2008 <http://www.gotquestions.org/Christian-insurance.html>

[14.] “Silahturahmi, Tukar Menukar Informasi dan Sosialisasi Rancangan Peraturan Pemerintah.” 17 December 2007. Bapepam. 20 September 2008 <http://www.bapepam.go.id/perasuransian/publikasi_asuransi/info_penting_asuransi/Silaturahmi%20Asuransi%20Syariah%2017%20Des%202007.pdf>

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