Insurance Law Dissertation Example | Topics and Well Written Essays - 1500 words

Insurance Law - Dissertation Example Indeed in the current scenario of uncertainties and risks, both within and outside the home, insurance in various areas of business and personal domain has increasingly become critical part of improved lifestyle (Ward, 2000). But interestingly, while the concept of insurance is similar the format of insurance, especially the criteria of framework and regulation of insurance differs significantly in Islamic countries like Saudi Arabia and western countries like UK. In the recent times, Islamic insurance has rapidly emerged as one of the most popular and also a highly effective strategy to reduce financial risk of the individuals and the government as a whole (Anderson, 1976; Habshi & Othman, 1997; Ahmad, 1972). Indeed, the growth and penetration of Islamic insurance across the non Islamic countries has been seen as a positive trend in the insurance sector. The paper would therefore, be focusing on the question as to why should there be development of Islamic insurance in Saudi Arabia and UK? Meaning of Islamic Insurance Islamic insurance is mainly guided by Shariah or Islamic laws that forbid business based on unethical practices. Various products of insurance are strongly influenced by Shariah principles that prohibit gain through means like gambling, uncertainties or interest income (Mortuza, 1989; Ismail, 1997,98). Uncertainties are involved in life insurance as the outcome is unknown at the time of entering into contract and could vary. Gambling refers to gain of wealth under some defined conditions and interest income is unethical as it is not reward against hard work (Maysami, 1998; Sharif, 1997; Siddiqui, 1971). Thus, new concept of insurance emerged under ‘Takaful’ that worked within the precincts of Islamic laws. Islamic laws fundamentally rely on equitable distribution of wealth. Takaful is based on the ethical practices and is free from gambling, uncertainties and interest income (Ahmad, 2009: Anwar, 2008; and Saleh, 1986). It broadly ref ers to contributions made by individuals to be used in times of crisis or need. Rather than individuals, the family as a whole becomes the main beneficiary. Stagg-Massey (2007) state that Takaful has been taken from ‘kafal’ which is an Arabic word that means guaranteeing each other and taking care of each other’s needs. Thus, Takaful is a cooperative mechanism that promotes fair practice and spreads the risks and reduces financial loss suffered by an individual within the group. Need for Islamic insurance in Saudi Arabia and UK Middle East and African nations have lagged behind in insurance primarily because of the restraints imposed by religion and the prevalent poverty of the region. The development processes and growth have become major paradigms that necessitate insurance coverage. After 1970s, the discovery of oil and gases in the Gulf region has transformed the economy of the region. The large investment in the infrastructure and rapid growth in internation al trade has spurred the need for insurance amongst the working and non working population of the oil rich countries. Takaful not only facilitates the poor to survive with dignity under excruciating circumstances but also encourages ethical practices that are fair and justified (SAMA). Saudi Arabia being a leading Islamic nation is therefore morally bound to promote Takaful. In western countries like UK, insurance has fast transformed into major industry that is motivated by vested interests of making profit by exploiting the