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CHAPTER 1: INTRODUCTION
This chapter, briefly, introduces the scope of the research, and explains the methodology used
in dealing with the subject matter of the project.
1.1. Background of the Study
Although, “it is still not known when organised insurance actually started, and in what type of
group it was developed” (Clayton, 1971:13), there is clear evidence, however, that the so-called
bottomry contracts (Shipping Insurance) were known to merchants of Babylon in Mesopotamia
as early as 4000-3000 years BC (Kasim, Htay, & Salman, 2016).
There are also ample pieces of evidence that many, if not all, civilisations (Babylonians,
Egyptians, Greeks, Romans, Arabs, and others) practised some form of mutual insurance. In
essence, insurance prototypes were known to all earlier civilisations and progressed further
with the development and advancement of the society, especially in the Islamic civilisation and
later in Europe and the rest of the world (Chachi, 2017). From the above-mentioned historical
facts, it appears that mutual cooperative insurance, whereby members of a group (family
members, for example) took care of the needs of the other members, is perhaps one of the oldest
transactions known to mankind and practised by many, even long before trade and industry.
Modern insurance may be historically recent, but the essence of insurance, whereby more than
one person come together and help each other overcome the risks and misfortunes of life that
may befall any of them, is as old as humanity and was known to all human societies across time
and civilisations. It is, as Mulhim and Sabbagh (nd:3) put it, “ one of the means people have used
for ages to deal with the consequences of damages, risks, and disasters which befall them in order
to alleviate their impact or to avoid them completely”.
Modern insurance had attracted the attention of Muslim scholars and economists, since the
second half of the 19th century, when many Muslim countries were subjected to colonisation and
therefore to illiteracy, ignorance, suppression and division by western colonisers and lost their
civilizational lead (Chachi, 2017). Before that, somehow, there was no real need for insurance in
Muslim communities, as the members of the small communities took care of each other by many
tools andmeans such as zakah1, sadaqah (charity), awqaf2 and Takaful ijtima'i (social solidarity),
advocated by Islamic teachings. However, with the cosmopolitan nature of modern societies and
complexities of life, where people living in the same neighbourhood, rarely know one another,
let alone meet or care about each other, it has become absolutely necessary to structure a
modern form of insurance to take care of every member of the society.
The question of whether modern insurance is permissible in Islam or not has been and remains
the subject of heated debates and controversy among Muslim scholars across the MuslimWorld
1 A form of alms-giving treated in Islam as a religious obligation.
2 An inalienable charitable endowment under Islamic law.