01 Multiple choice — 12 questions
One attempt per option. A correct answer locks the question and explains itself; a wrong one only disables that option, so you can keep trying. The running score sits at the bottom of the page.
02 Written questions — 9 questions
Answer each in full before opening its model answer. The model answers are written at the length a full-mark response needs.
1. State the three historical forms of collaborative insurance in Islam and the three modern systems.
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Historical (Z.K.S.): the People of Zakat — those in unpayable debt or extreme poverty helped through the alms of the wealthy; the Kinship system (Aqilah) — blood money for accidental homicide distributed among the killer's paternal male relatives; and Social solidarity — the Ash'arites pooling and equally redistributing their food when supplies ran low.
Modern (R.S.R.): the Retirement System (a monthly state pension at a set age or tenure, funded by salary deductions); the Social Security System (state cover for manual laborers against illness, disability, and old age, funded by deductions plus Zakat and treasury support); and Reciprocal Insurance (a non-profit mutual fund of member donations supporting any member in distress).
2. Give the three reasons commercial insurance is prohibited, and map each riba scenario to its payout.
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Excessive uncertainty (gharar): a deceptive contract with heavy uncertainty, and every compensation contract containing deception is corrupted — the Prophet ﷺ forbade the deceptive sale.
Elements of gambling: one party gains at the other's unearned expense on pure chance; an insured may pay one premium and collect a huge payout, or pay indefinitely and receive nothing, while the insurer assumes liability without having caused the damage.
Both forms of riba: if the company pays more than what was paid in, ribā al-fadl; if it pays back exactly what was paid, ribā al-nasī'ah; if it pays nothing because no risk occurred, it took the money illegitimately.
It is the combination of all three, not gharar alone.
3. Compare commercial and collaborative insurance across the five dimensions given in the lecture.
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Ruling: commercial is prohibited; collaborative is encouraged. Contract type: compensative versus donation. Target: profit versus collaboration and solidarity. Surplus: not recalled to participants versus recalled — it belongs to them. Structure: personal, an individual contract with a company, versus common, a shared pool for the group.
The pattern: commercial is individual and profit-facing; collaborative is shared and solidarity-facing.
4. A student answers that commercial insurance is prohibited "because of gharar." Correct and complete the answer.
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Gharar is only one of three reasons. The full answer is gharar, gambling, and riba (G.G.R.).
Gharar: the contract carries heavy uncertainty and deception, and every compensation contract containing deception is corrupted. Gambling: one party gains at the other's unearned expense on pure chance — an insured may pay one premium and collect a large payout, or pay indefinitely and receive nothing. Riba: both forms, depending on the payout — more than paid in is ribā al-fadl, exactly what was paid is ribā al-nasī'ah, and nothing paid means the company took the money illegitimately.
5. Define insurance linguistically and technically and explain its original purpose and later development.
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The philosophy
Insurance rests on collective risk-sharing: one person could be crushed by a disaster's full cost, but pooling relief expenses across a large group makes the burden manageable. That cooperative ideal was compromised when insurance shifted from mutual aid to a profit-driven commercial enterprise.
6. Explain collaborative insurance, its evidence, three historical forms and three modern systems, with the ruling for each.
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"And cooperate in righteousness and piety, but do not cooperate in sin and aggression." One verse, one word to hold onto: cooperate.
Three historical forms in Islam
Three modern systems
| System | How it works | Funded by |
|---|---|---|
| Retirement | Monthly pension at a set age (e.g. 55) or tenure (e.g. 20 years). No gharar — it is a donation contract, and labour are both insured and insurer. | Deducting part of the employee's monthly salary |
| Social Security | Government-run cover for laborers who live by handcraft or manual work — illness, disability, old age. | Salary deductions, collected Zakat, and direct government treasury support |
| Reciprocal | Non-profit solidarity run by charitable / mutual associations; members support any member in distress. E.g. a staff or village emergency fund. | Regular member donations into a pooled fund |
Legal ruling
Scholars agree social / cooperative insurance is fully lawful in all its forms, because it fulfils the Islamic objective of mutual solidarity rather than commercial profit.
How a collaborative contract actually works
Collaborative associations collect donated subscriptions, invest them, and use the pool plus investment profits to cover subscriber risks. Any surplus after settling claims belongs entirely to the participants — they can take it back or roll it into future payments.
7. Describe the emergence of commercial insurance, its five elements, all five risk conditions and its three types.
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A contract between an insurance company and an insured person: the company is legally bound to pay the insurance amount covering risk or damage; in return the insured pays regular installments (premiums). The company profits from the gap between premiums collected and claims paid.
Emergence: began as marine insurance in northern Italy in the 15th century, then transferred to Islamic countries in the 19th century AD under the name "Saukarah."
Five elements of the contract
- The insurer
- The insured
- The specific risk
- The insurance installment — paid by the insured to the company
- The insurance amount — paid by the company
Five conditions of the risk
- Uncertain — its happening must not be certain.
- Not intentional.
- Not prohibited by law.
- A future event.
- A regular / ordinary danger.
Three types
8. Explain gharar, gambling and both forms of riba in commercial insurance, then discuss each of the three exceptions with its limits.
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| Reason | The argument |
|---|---|
| Gharar | A deceptive contract with heavy uncertainty. Every compensation contract containing deception is corrupted — the Prophet ﷺ forbade the deceptive sale. |
| Gambling | Mirrors wagering: one party gains at the other's unearned expense, on pure chance. An insured may pay one premium and collect a huge payout, or pay indefinitely and get nothing. The insurer assumes liability without having caused the damage. |
| Riba | Both forms. Pays the beneficiary more than was paid in → ribā al-faḍl. Pays back exactly what was paid → ribā al-nasī'ah. Pays nothing because no risk occurred → the company took the money illegitimately. |
Three exceptions
9. Compare commercial and collaborative insurance in contract, purpose, risk, ownership of surplus and Shariah ruling.
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| Dimension | Commercial insurance | Collaborative insurance |
|---|---|---|
| Ruling | Prohibited | Encouraged |
| Contract type | Compensative | Donation |
| Target | Profit | Collaboration and solidarity |
| Surplus | Not recalled to participants | Recalled — belongs to participants |
| Structure | Personal — an individual contract with a company | Common — a shared pool for the group |