Insurance is a financial product that a person should have in order to prepare for future events. The system of this financial product is quite simple: the client signs a contract (policy), regularly deposits a certain amount of money (premium) to the provider company. this service And can withdraw some money (claim) if desired.

The insurance company that collects the money will handle it as best as possible. whether to invest in investment instruments Used for financing, etc., so that the money does not just stay in that company. Service companies are entitled to receive commissions instead.

One type of insurance that is in great demand among Indonesians today is Shariah insurance. Find out the differences between Islamic insurance and traditional insurance and their advantages and disadvantages by reading the following articles.

Overview of Sharia Insurance

Simply put, Shariah insurance is an insurance product that is managed according to Shariah law and the principle of mutual assistance between policyholder clients. Another word for this product is takaful, which means mutual support or mutual protection in Arabic.

In contrast to general insurance products Companies that manage Shariah insurance cannot allocate clients’ funds. (called tabarru funds) in interest-bearing investment instruments (interest), uncertainty (gharar) and gambling (maysir), so clients are free from unethical practices.

According to Julia Kagan from the page InvestopediaIn addition, tabarru’s fund management companies are required to create separate accounts to store tabarru’s funds, comprising client funds and investment profits. and money from the owners of the capital that established the insurance company. Therefore, capital owners cannot freely use client funds.

Advantages of Sharia Insurance

1. Shariah-based fund management

The main advantage of Islamic insurance is that this financial product is managed in accordance with Islamic law, so clients do not need to worry that the money they deposit or receive bears interest. Mutual assistance (taawun) Customers who use financial products indirectly also help those in need more.

For example, there are 10 insured people who contribute 100,000 per month. In 1 year, 12,000,000 rupees are collected. 9 out of 10 people have never been sick in the last 1 year, so the insurance premium is still full. On the other hand, 1 person out of 10 people. Suffering from a tumor which requires surgery that costs 10,000,000 Indian Rupees with the principle of indirect assistance, all 9 people help 1 person by joint insurance.

2. Supervised by the Islamic Regulatory Commission

Another advantage of Shariah insurance that traditional insurance does not own is oversight from the Shariah Supervisory Board (DPS). ahh in financial institutions

Although they can be appointed directly at the General Meeting of Shareholders (GMS), the Indonesian Ulema Council has the right to suggest names of people who can hold this position. It is not often that a DPS is comprised of individuals who are not only economic and financial savvy. but also to those who understand Sharia law.

3. There is a mechanism for underwriting excess insurance.

Insurance surplus is the difference between the total contributions. (Premium) and all claimed tabarru’ funds. For example, in the case of 10 people, 9 of the above are healthy and 1 is sick. If total fund of tabarru is IDR 12,000,000 and total fund claimed is IDR 10,000,000 then remaining IDR 2,000,000 will be calculated as insurance surplus.

in sharia insurance insurance surplus It must be shared equally as profit for the policy holder. management fee For example, Allianz Shariah Insurance shares the remaining 60% for client benefits, 20% for tabarru funds, and 20% for management. These customer benefits can be in the form of dividends or discounts for the next period.

4. Profit Share

As mentioned above, tabarru funds are transferred to various investment instruments. so as not to pay on the company’s account as well as general investors Investments from this insurance fund are also eligible for benefits.

Therefore, in the Islamic insurance mechanism Investment profits are shared equally between clients and management. This differs from conventional insurance where the capital gains are fully owned by the management. unless you join unit linked insurance.

5. Transparency in financial management

One of the risks of providing this service in Indonesia is that insurance companies need to be transparent. To ensure that there is no information gap between the company and the customer.

However, customers are requested to use discretion when reading the policy. The reason may be that the company tries to be transparent but the customer still violates the contract in the policy because of not reading carefully.

Disadvantages of Sharia Insurance

Although there are quite a lot of advantages. But Shariah insurance still has several weaknesses. Especially with insurance companies, including:

1. Limited profit potential

The first weakness of this financial product is the limited profit potential that insurance companies can accept. Because not everything can be guaranteed in Shariah insurance. And Tabarru’s money cannot be allocated for non-Shariah investment instruments.

Tabarru’s allocation must be approved by the Syariah Supervisory Board (DPS). They are not as flexible in managing client funds as traditional insurance companies.

2. Lack of public understanding

It cannot be denied that sharia insurance in Indonesia only came after general insurance increased. As a result, many Indonesians still think that this financial product is no different from regular insurance.

3. We cannot guarantee everything.

Shariah insurance typically only covers general insurance, health insurance, and life insurance. This is definitely different from general insurance. which can take many forms From car insurance to business insurance This means that the Customer may only use the Service for certain purposes.

Who is eligible for Sharia insurance?

Although it is called Shariah insurance. But basically anyone can buy this financial product. including non-Muslims Indonesians, regardless of their religion, can buy this financial product as long as they want insurance services with transparent policies and clear benefits.


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