POSTAL LIFE
INSURANCE: A SHARIAH APPRAISAL
ABSTRACT:
Postal Life insurance is
one of the oldest insurance departments which came into existence in 1884 for
the welfare of postal employees initially. This institution is a very different
institution which is working under the Ministry of Finance, Government of
Pakistan. All collected funds are invested by the Ministry for the development
projects. Demand of Postal Life insurance is also an evidence of its importance.
A huge number of People don't want to purchase policy of Postal Life Insurance
due its non Shariah compliance. This paper will focus on the Shariah compliance
of Life insurance introduced by Postal Life Insurance and alternative system
will also be suggested.
Key Words: Postal Life
Insurance, Importance, Shariah position and Alternative.
1. INTRODUCTION:
Mutual cooperation is
the essence of man to man relationships since beginning of the human society.
In modern ages society became more complex than ever before. To meet the needs
of modern day needs man reshaped/came up with the concept of insurance as a
substitute of the values of mutual cooperation.
As compared to general
insurance the ratio of micro insurance is low in Pakistan. In Pakistan there
are only four public sector insurance companies. Among which Postal Life
insurance is oldest one. Among the 59 registered insurance companies we find
only one institution providing micro insurance to the general public. In Pakistan postal Life insurance is working
purely for the welfare of poor people. It was established in 1884. PLI is a sub
department of Pakistan Post[2].
This department is working under the supervision of Ministry of Finance. Postal
Life insurance is providing insurance facility on very low premium.
2. POSTAL LIFE INSURANCE:
Postal Life Insurance is
a Government owned institution in Pakistan. Postal life insurance has played an
important role in domestic saving and national development. Postal life
insurance has also been contributing significantly towards capital formation in
the country, thereby boosting the national economy. It has been playing a
positive role in checking inflationary trend by mobilizing saving and placing
huge funds at the disposal of the government for investment in various
development schemes.
Postal life insurance
was established in 1884 for the welfare of postal employees initially. Now
every Pakistani national can purchase PLI policy, as it is open to all members
of the community. Postal life Insurance plays a very important role in
mobilizing the community saving and channeling them for investment in schemes
of national importance the small saving in the form of Life insurance premium
collected regularly from many policy holders. Mostly the amount is put to work
for policy holder’s amount to large seems. These sums of money and poured in to
economic stream of the nation and thus flow to all parts of the country and
into many forms of enterprises. As a result of these useful development schemes
new industries come into being which not only helping in new avenues of
employment but also tends to raise the earning capacity of our people and
gradually lead to a higher standard of living. Consequently, more people get
reasonable income. The cycle of the benevolent function of life insurance is
complete when these people begin to save through life insurance and plough back
their saving for future creative purpose. Thus postal life counteracts
inflation and helps in stabilizing and building the national economy.
3. LIFE INSURANCE POLICY IN PLI:
Postal life insurance is
offering different types of policies for the welfare of general public. One of
them is life insurance (Three payment Plan Policy), which is very popular in
public. In this policy Postal Life insurance pays amount in three installments.
This policy can be taken for the period of 12, 15…30 years. First payment
amounting 25% will be paid after completion of 1/3 period. Second payment
amounting 25% will be paid after completion of 2/3 period and remaining 50%
with bonus will be paid on maturity.[3]
The client can get loan equal to the amount of premium collected after 2 years,
e.g. client "A" purchases a life insurance policy from Postal Life
insurance sum assured was 10,000 and his calculated premium was 100 per month
and 1200 P.A and his duration of policy was 10 years. He will get 2500 (25% of
10000) after completion of about 3 years and 2500 (25% of 10000) after
completion of 6 years (25% of 10000) and 5000 (50% of 10000) and bonus on
maturity. There are some options for client to re invest and the amount which
they get during the period of maturity. If they will reinvest they can get more
benefits and bonus on invested amount.
4. EFFICIENCY ANALYSIS OF POSTAL
LIFE INSURANCE:
* Rs.
in Billions
Year
|
Number of Fresh Policies Issued
|
Sum Assured
|
Premium Income
|
2004-2005
|
28508
|
4448.154
|
185.925
|
2005-2006
|
30036
|
5079.9
|
207.481
|
2006-2007
|
29388
|
5124.658
|
210.2895
|
2007-2008
|
28606
|
5136.706
|
217.605
|
2008-2009
|
30968
|
5992.752
|
267.866
|
2009-2010
|
30643
|
6989.099
|
318.707
|
Demand of Postal Life Insurance is increasing day by day, but not according to its effectiveness. It is clear from following chart that number of policies issued by Postal Life Insurance is increasing (Annexure1-2-3). Sum assured and premium is also a substantiation of PLI's efficiency. (Insurance A. D., 2011) As its all funds are normally invested by Ministry of Finance 25 Billion are with Ministry of Finance
A number of clients
don't want to purchase policy of Postal Life Insurance due to some other issues
which will be discuss later one of them is Non Shariah Compliance of Postal
Life Insurance. If it is Shariah Compliant the poor people of Pakistan who
don’t want to indulge in Interest can get benefit from Postal Life insurance.
5. POSTAL LIFE INSURANCE IN THE
EYES OF ISLAMIC LAW:
According to the council
of Islamic Ideology report on Islamic Insurance system Postal Life insurance is
a mutual insurance on the basis of non profit and loss. Postal Life insurance
has two characteristics which makes it different from other insurance business.
First its operations are under the supervision of Government of Pakistan and
secondly this is on mutual basis. In CII report they have mention that if an
insurance company is working under the supervision of Government some
prohibited elements may be acceptable. [4]
6. SHARIAH ISSUES IN POSTAL LIFE
INSURANCE:
In Insurance
there are normally three elements which make it non Shariah Compliant Gharar,
Qimar and Riba. All these elements are explained as follow.
GHARAR:
Islamic law does not allow Gharar
transactions in which the seller does not know what he has sold and the
purchaser does not know what he has purchased. Prophet (SAAWS)[5]
prohibits from Gharar contracts. (Mansoori, 2009) In insurance Gharar exists in three forms that client doesn't know
that how much he will pay, for how much period he will pay and how much we will
get. It makes transaction invalid. (Usmani, 2008) For example a person purchases a life insurance policy for ten
years he pays premium Rs. 100 every month. He will pay twelve hundred for a
year. He will pay twelve thousand in ten years. The insurance company contracts
that if insured will die the company will pay 10,000 to his family and if he
will alive the company will pay twelve thousand and interest[6] after
ten years it is called life insurance. As the insured can get his paid amount
back the element of Qimar is missing but if the payment of deposited amount is
on chance it may be called Qimar. We can say that the transaction is free from the
element of Qimar but it consist the element of Gharar.
RIBA:
Riba is strictly prohibited in Quran. Riba
exists in insurance in three types, investing activities, and its two types
Riba al Fadal and Riba al Nasia.
RIBA
AL FADAL:
This is a normal Question from insurance
practitioners that how interest involves in insurance. Insurance companies
invest in property and real estate, so how it is possible that Riba (Interest)
can involve in insurance?
According
to Hadith on the authority of Abu saeed khudri (RAA):
“Who
reported that the Prophet (SAAWS) Said, while exchanging Gold for Gold, Silver
for Silver, Wheat for Wheat, Barley for Barley, Dates for Dates. And Salt for
Salt, Do so on Mithlamm-bi-mithl (like for like and yadamm-bi-yad (hand to
hand)/ on spot basis. Thus whoever gave more or demand more verily he dealt in
Riba. Both the taker and giver are equal (Guilty) in this regard. ”
·
According
to above hadith exchange of similar goods which are not equal is prohibited.
·
If
we want to Exchange Similar goods we should exchange in equal quantity.
·
If
the goods are not in similar type so it is up to buyer and seller, they can buy
and sell.
Now
we will discuss that what is the link between conventional Insurance and Riba
Al Fadl? It is a sale contract (Aqd-e-Muawadaat) –
there are two parties to this contract, The Insurer/Company and
insured/policy-holder
There is consideration by way of PREMIUM and there is the subject
matter of (insurance) contract. The type of contract that this sale agreement
falls under is ‘contract of exchange’ where money (by premium) is exchanged for
money (by way of claims) in case of loss. For instance, if I have insured my
car has stolen, the insurance company will not buy for me a new car in its
place; it will only pay me the market value for it in the same currency.
Similarly, if a property is destroyed, the insurance company does not give me
bricks and material for re-building it, it will pay me the “amount of loss”.
Thus it is a sale contract where the same kind of species (currency) is exchanged
in both the transactions.[7]
There
are SIX kind of species that have been specifically mentioned by our Holy
Prophet (may peace be upon him); in trading (is. effecting sale of) these, when
there is also a time lag between the two transactions (like in case of payment
of premium and receipt of claim), both the sides of the balance MUST be equal,
otherwise an element of DIRECT RIBA is involved. Those six species are: Gold,
Silver etc as mention in above hadith. In modern day currency has replaced exchange
of Gold and Silver for trading.[8]
So
when the policy holder faces loss he receives an amount above/Less than the
paid amount. So this exchange of money which is unequal leads the transaction
to Riba.
There
is a question if the policy holder receives equal amount which he has paid to
the company in the shape of Premium. It will be Riba or not?
Answer:
It is very rare case and It will be also Riba we will not go to the amount but
we will see to the contract in which the policy holder have involve.[9]
RIBA
AN-NISIYAH:
Riba
An-Nisiyah is the second element which involves in the conventional insurance
contract and causes the prohibition of contract. Now we will see that how this
type of Riba involves in insurance contract. Riba An-Nisiyah realized when
delivery of one counter-value is delayed.[10]
Jurists argue that in insurance contract the policy holder receives amount in
the shape of compensation against the amount he has paid in the shape of
Premium. So the exchange of Money them money which is similar item should be yadamm-bi-yad (hand to hand)/ on spot basis.
But the policy holder receives on a specific time period or on happening of
loss. So it will leads to Riba transaction
RIBA
FROM INVESTING ACTIVITIES: As
we have mentioned above that the conventional insurance involves basically two
forms of Riba in Riba Al Fadl and Riba An-Nisiyah which is kind of Riba Al Fadl and there is an other form which
leads the insurance contract to Rabwi transaction. So in this form insurance
company invests its money in securities and other interest bearing transactions.
[11]
Premium is paid up-front on day one, whereas claims can occur even
on the last day of the year. Till that time, the conventional insurers have
that amount at their disposal which they invest and earn investment income
thereon. As a matter of fact, the conventional insurance
companies have huge funds at their disposal which they do invest in all
forms and avenues of investment without consideration of interest or
non-interest. This renders their entire investment as Haram/Prohibited.
ELEMENT OF QIMAR / GAMBLING IN CONVENTIONAL INSURANCE:
Qimar is also prohibited in Islam like Riba and Gharar[12].There
is also element of Qimar in conventional insurance. In the contracts of
insurance the insured loses his premium if the event does not happen and in the
other situation the company pays his several times more than what he has paid
as premium. This clearly amounts to gambling as one party loses by more chance
and the other gains undeservedly. [13] (Samdani D. E., Des 2007) (Usmani, 2008) A scheme of Life
Insurance in which policy holder 's entitlement for his principle premium is
confirm in all situation is free from the elements of Qimar while/ and where
the recovery of principle premium of is not confirm in part or as a whole the
transaction is having Qimar.
7. CONCLUSIONS AND
RECOMMENDATIONS:
Postal Life insurance is one of the oldest insurance departments.
As discussed above that a number of people don’t take interest in Postal life
insurance due to its non Shariah compliance. In a conventional insurance
normally there are three elements which make it non Shariah compliant Gharar,
Riba and Qimar. But in life insurance only two elements makes it non Shariah
compliant According to Council of Islamic Ideology in Government Level
insurance companies Postal Life insurance is performing Shariah Compliant
Business. Investment of Postal Life insurance directly goes to Ministry of
Finance. Ministry of Finance invests that amount in Development projects. In
Postal Life Insurance Bonuses are very high as compared to other government
based insurance companies because, other companies pay high rate of commission
to their agents and PLI having no agents. No Budget for Advertisement and No
marketing staff. Staff having no time for clients because only one or two
person is performing Postal services, saving bank services and postal insurance
services that’s why they can’t give time to clients. There are not separate
branches of Postal Life insurance.
REFERENCES:
1.
Al Quran
2.
AAOIFI. (2008). Shariah
Standerds. Accounting and Auditing Standerds of Islamic Financial
Institutions.
3.
CII. (1992). Islamic Insurance System. Islamabad:
Council of Islamic Ideology Goverment of Pakistan.
4.
Insurance, P. P. (n.d.). Broushers. Postal Life Insurance
. Islamabad, Pakistan: Pakistan Post Department of Postal Insurance G-8/4
Islamabad.
5.
IPS. (1997). Jadeed Iqtsadi Masail Shariat Ki nazar Main.
Islamabad: Institute of Policy Studies.
6.
Mansoori, D. M. (2009). Islamic Law of Contracts and
Business Transactions. Islamabad: Shariah Academy, International Islamic
University, Islamabad.
7.
Post, P. (2005). A Brief Introduction:Postal Life
Insurance Benefits & Advantages of Different Policies. Pakistan Post.
8.
Samdani, D. I. (2002). Takaful. Lahore: Adara
Islamiyat.
9.
Samdani, D. M. (Jan 2007). Mali Muamlat Par Gharar Kay
Asrat . Karachi: Adara Tul Muarif.
10.
Usmani, M. M. (2008). Islam aour Jadeed Muashi Masail.
Lahore: Adara E Islamiyat.
11.
www.pakpost.gov.pk. (2011, 09 23). Retrieved 09 23, 2011, from Pakistan Post:
http://www.pakpost.gov.pk/financial/pli.html,
[2] www.pakpost.gov.pk. (2011, 09 23). Retrieved 09 23, 2011, from Pakistan Post:
http://www.pakpost.gov.pk/financial/pli.html,
[3] Post, P. (2005). A Brief Introduction:Postal Life
Insurance Benefits & Advantages of Different Policies. Pakistan Post.
[4] CII. (1992). Islamic Insurance System.
Islamabad: Council of Islamic Ideology Goverment of Pakistan.
[5] عن ابي هريرة رضي
الله تعالي عنه قال : نهي رسول الله صلي الله عليه وسلم عن بيع الحصاة وعن بيع
الغرر
[6] Interest is
unanimously prohibited
[7] Akhtar,
Captain Jamil,
[8] Ibid
[9] Samdani,
Dr.Ijaz Ahmed, Takaful, Adara Islamiyat, p.30
[10] Khan, Attique
Zafar, Insurance form Islamic Prespective,p.7
[11] Ibid p.7
[12] (المائدة:9)يا أيها الذين
آمنوا إنما الخمر والميسر والأنصاب والأزلام رجس من عمل الشيطان فاجتنبوه لعلكم
تفلحون
[13] Prof. Atiquzzafar
Khan, Takaful , Objectives and Methodology, p#6
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