Know What Syariah insurance is
In conventional insurance, policyholders pay the premium to the insurance company. The company owns the premium and pays the sum insured in case of claim. So in conventional insurance, the risk and profit is in the insurance company. There is a risk transfer (transfer) from participants to the insurance company.
While Syariah insurance, its concept and definition are different, the risk is divided among insurance participants. In this way, participants pay the contributions collected into a shared account called Tabarru.
Tabarru ' is a donation or donations (in the definition of Islam is a grant). Contributions or donations (grants) or welfare funds are granted and disclaimed by Syariah insurance participants if at any time will be used to pay for claims or other insurance benefits.
Each time a claim occurs, the payment is done by cutting the Tabarru '. Group funds do not belong to an insurance company, but the property of Syariah insurance participants.
In Syariah insurance coverage, the participant relationship process is sharing of risk. In case of calamity, all participants of Syariah insurance bear each other. Unlike conventional insurance that occurs risk transfer from participants to insurance companies.
In the concept of Syariah insurance, the role of insurance company is only as a trustee in managing and investing funds from participant contributions, and must comply with Syariah principles. Insurance companies are hired by participants by paying commissions.
Supervised by Syariah supervisory board
To ensure that Syariah principles are properly applied by Syariah insurance companies, the Indonesian Ulemas Council (MUI) forms the National Syariah Board (DSN).
Where, the DSN is tasked to supervise the implementation of Syariah economics principles in Indonesia, including issuing a fatwa or governing law.
The Syariah Supervisory board (DPS) must be in every Syariah financial institution. DPS is the representative of the DSN in charge of ensuring the financial institution has implemented the Syariah principle correctly.
Investments must be made in Syariah securities
One feature of Syariah insurance is that the investment must be done only in Syariah securities. Syariah securities fulfill the following two criteria.
1. Not conducting business activities contrary to Syariah principles, for example:
Gambling, trades not accompanied by the delivery of goods/services, trade with false supply/demand, financial services Ribawi, and buy and sell risks that contain elements of uncertainty (Gharar).
Produce, distribute, trade and/or provide, among others, the goods or services of Haram (Haram Li-Dzatihi), goods or services haram not because of nutritional (Haram Li-Ghairihi) stipulated by the DSN-MUI, and/or conduct transactions containing the element of bribery (Risywah).2. Meet the following financial ratios:
- Total interest-based debts compared to total equity of no more than 82%.
- Total interest income and other unkosher income compared to total revenue (revenue) and other income no more than 10%.
Based on both criteria, the Financial Services Authority (OJK) issued a list of Syariah securities (DES), a collection of securities that do not contradict the principles of Syariah in the market. DES is an investment guide for investors who want to invest in a portfolio of Syariah securities.
Here are some benefits of Syariah insurance.
Protection of life, accidents and permanent disability and financial plan according to Syariah principles. Through periodic contribution payments, participants can determine the size of the coverage.
Exemption of basic contributions. In the event of total disability caused by illness or accident, participants can enjoy the benefits of insurance even in the situation of total disability.
Protection of health costs. Reimbursement of hospital care costs caused by illness and accident. Equipped with cashless facilities that facilitate hospital maintenance without cash payment, and services are available daily with a network of partner hospitals in all regions of Indonesia.
Interested in having sharia insurance? If yes, do not forget to check the completeness of administration and company reputation. Therefore, every sharia insurance company has different conditions, ways, and processes.