ISLAMIZATION OF INSURANCE IN PAKISTAN

Atiquzzafar Khan

ABSTRACT

Insurance performs an important role in smooth functioning of every economy today. Muslim scholars contributed lot of efforts to decide the Shari'ah position of this business since its start in the Muslim societies. After long debates and discussions a majority view about insurance is that although the concept and objectives of insurance is not in contradiction with Shari'ah but its present prac- tice involves many prohibited elements like Riba, Gharar and Qi- mar. Some scholars come up with alternative schemes to run insu- rance business according to Islamic principles and one prominent scholar among them is late Mufti Muhammad Shafi. The council of Islamic Ideology Pakistan compiled a report for Islamization of insurance business in Pakistan and submitted it to the government in 1992. In Pakistan some steps were taken to Islamize the banking sector but no attention was given for Islamization of insurance sec- tor. Around 50 Islamic insurance companies are working in various Muslim countries under the name of Takaful companies. Unfortu- nately insurance sector in Pakistan is still being managed accord- ing to the Insurance Act 1938. Many sections of this act are in con- tradiction to Islamic principles and bring.element of interest in the

Assistant Professor, IIIE, International Islamic University Islamabad contract. There is a need to either promulgate a new act to organize the insurance business in line with Shari'ah or make the suitable amendments in the existing Act by removing all the sections con- tradictory with Shari'ah.

The insurance companies should arrange their business on the basis of Mudarabah and Tabarru (Gili). The larger portion of the premium should be invested by the company in the capacity of Mudarib and the profits be distributed among the policy holder and the company according to some agreed upon proportion. At the maturity of the policy the individual should receive his contribu- tion along with his share of profit. A relatively small component of premium should be deposited in a cotnnlon fund hy all the policy holders with the understanding that if any of the group member face a specific loss he will be helpcd from this fund. If some poli- cies are short-term policies, mostly in general insurance, then it will not be possible for the company to make investment or the premium money. Therefore all the contribution will bc received as Tabanu. If any group member will face a specific loss he will be compensated from the common rund other wise he will not receive any thing back.

INTRODUCTION: Pakistan is an ideological country, got independence with the ob- jective to be a homeland for the Muslims where they could live ac- cording to their religion. Muslims of India sacrificed their lives for this Nobel cause and ultimately succeeded in achieving Pakistan. Unfortunately this objective is never fulfilled after independence. After the death of Muhammad Ah Jinnah, the leader of this move- ment and first governor general of Pakistan, no government paid serious attention towards Islamization. In late seventies the gov- , ernment showed some interest and announced many steps. Estab- lishment of the system of Zakat and Salat and Islamization of bank- ing system are important steps which need to be mentioned. No r' attention was given to the insurance sector even in that era. Insu- rance sector performs very important role in the smooth function- ing and development of any economy in today world. Insurance business is an important contemporary issue of Islamic jurisprudence which has attracted so many debates and discussions. Since the introduction of this business in Islamic societies, Muslim scholars are writing on this issue. Their opinion is sharply divided on the issue. A considerable number of religious scholars is op- posed to the principle of insurance and the form of its organization. The most objectionable form of insurance, to these scholars, is the insurance against the loss of life, since it involves gambling and un- certainty, and is opposed to the ccmcept of predestination (Taq- deer). Other scholars while appreciating the philosophy and rationale of insurance disapprove most of the forms of insurance contracts un- dertaken by commercial insurance companies. They see in them ' elements of risk, uncertainty, ignorance, usury which are inaliena- bly associated with insurance. A large number of scholars has re- jected the prevalent practices of insurance on the aforesaid grounds. Among the prominent scholars of this group are Mufti Muhammad Shafil, Maulana Maududi (2), Sheikh Ahmad brah him(^), Mustafa aid(^), Sheikh Moharnrnad ~akheet(~),Sheikh Abu ~ahra(~),Issa ~bduho(~),Ahmad ah mi(^), Dr. Hussain amid('), ~r.~uslehuddin('~),Dr. Jalal Mustafa sayyad(ll) and inany other distinguished scholars. Commercial insurance has been a target of grave criticism and ob- jection in a number of conferences and seminars.' The Assembly of Islamic Jurisprudence in its meeting on Sha'ban 10, 1398 A.H.

' unanimously held that all types of commercial insurance whether it relates to life or commercial goods and wares or other article are unlawful in Islam. The same view has been upheld in the resolu- tions passed at the Islamic Research Congress in 1965, and First In- ternational Conference on Islamic Economics of 1976, and Su- preme Council of Ulama at Riyadh on 4-4-1397 A.H. The Council 4 of Islrunic Ideology in its meeting held 011 April 29, 1992 declared corn~nercialinsurance undertaken by insurance companies contra- dictory to the injunctions of Shari'ah owing to the involvement of elements of uncertainty, gan~blirigand interest. There is yet another group of Musliil~scholars which maintains that insurance is permissible since it is bascd upon the principles of mu- tual assistance and reciprocal responsibility which lslanl wants lo promote among the Muslims. Further, the uncertainty involved in illsurance is uot of a sufficiently high degree to warrant its prohibi- tion. This viewpoint is held by Mustafa ~ar~a('~),Sheikh Ali a1 ~hafifi'~),Dr. ~ousufMuss("), Mollaminad Ali ~ahi('",Dr. Nija- lullah siddiqui(I6), Ahmad Talia AI-~anuusi("), Gharib ~a~nal('~) Abdul Mannan(lY)and many other scholars. Insurance, according to these scholars is a cooperative effort for help and security. Tky also do not see any attribute of gambling in any fonn of insurance. They differentiale between the risk taken up by the gambler and ' those involved in the ordinary business of life that insurers tiy to meet. But the majority opinion is that in its present form insurance con- tract is in contradiction with many important Shari'ah principles, hence it is unlawful and prohibited. 'She major objeclions found in this contract are involvement of Kiba, Gharar, Gambling, violation of law of inheritance, and Akl-e-Amwal bil Batil. The Council of Islamic Ideology Pakistan on its own initiative re- viewed the insurance laws and proposed some changes, but no practical step was taken in this respect. The council also prepared a report " Islamization of Insurance" for the government in 1992 but the government did not consider implementing it practically. The present government has shown interest in Islamization and consii- tuted a commission for preparing a report on Islamization of the fi- 1 nancial system. The commission has already submitted a report on Islamization of banking and is presently working on Islanization of insurance. This papa presents a proposal for-Islaniizatim of irlsurance in Ya- kistan. Establishing i~lsuraricebusiness on Islunic. principles is im- portant not only on the religious gmunds but also for the growth of this business itself. Because llre majorily of Muslim try Lo avoid purchasing a11 insurance policy, considering it un-Islamic, unless they feel bound by law or expect an unbearable loss. The first section of this paper will describe the existing structure of insurance sector in Pakistan. in the second section a brief history of cfforts for lslalnization of insurance in Pakistan will be given.. In the last section we will discuss the required changes in thc Insu- rance Act 1938 to niake the 1sltlmii.ation possible and a scheme for running this business according to Islamic principles. Section I STRUCTURE OF INSURANCE SECTOR IN PAKISTAN The insurance industry falls within the ambit of the Ministry of Commerce which, through the Controller of insurance, exercises control to implement government directives, laws and regulations. The i~lsurancebusiness in Pakistan is governed by the Insurance Act of 1938 as adopted by Pakistan since 1947. This sector com- prises of four major regulatory co~porationslorgmisations, state owned life ilisurance corporation. ad66 private i~~surancecompa- nies both local as well as foreign. The four major regulatory organi- sations are: Department of Insurance This department was set-up in April 1948, as part of the Ministry of Commncrce. The head of this department is the Controller of insu- rance working under the Insurance Act 1938 and enjoys the neces- sary powers to regulate the general and life insurance business in the country. Its statutory functions include registration of new insu- I r rance conlpanies, renewal and cancellation, examination of annual account, control over commission paid to the ageuts and grant and renewal of licenses to insurance agents, employers of agents and in- @ surance surveyors. The non-statutory functions include complaints from policy-holders and insurance agents against insurance compa- nies, amendments in the insurance act and rules. Insurance Association of Pakistan (I.A.P.) By and large, the general insurance market in Pakistan is guided by tariff structure provided by the Insurance Association of Pakistan formed as far back as 1948. It is a voluntary organization represent- ing all the private insurance companies working in Pakistan. Its ma- jor functions are, * to develop tariff rates for all major classes of insurance on the basis of statistics collected from member companies. * to co-ordinate activities of common interest to the insurance sector. * to liaise with the government on various matters concerning the insurance industry. 4 Pakistan Insurance Corporation (P. I. C.) Pakistan Insurance Corporation was established in 1953 under an Act passed by the parliament in 1952. It has, since its inception, been transacting re-insurance business. Every insurer in Pakistan is required to cede to it a prescribed proportion of sums assured on all policies issued by the insurer. At present, such proportion is 20%. Moreover, under surplus reinsurance regulations, PIC also has the right to take up to 35% share in reinsurance treaties. The corpora- tion may also write such direct insurance business as authorized by the federal government. Besides, it may organize and manage gen- eral insurance business of the government and statutory corpora- tions as required by the government. The National Insurance Corporation (N.I.C.) S National Insurance Corporation was set up under the NIC Act 1976. Insurance business relating to any public property, risk or lia- bility pertaining to any public property is solely and exclusively re- '' quired to be placed with the corporation.

INSURANCE COMPANIES: At the time of independence the insurance market in Pakistan was dominated by foreign insurers. There were as many as 77 foreign insurers while there were only 7 local insurers. Pakistani companies were conducting their business on rather a modest scale because of their size and resources. On the other hand, the foreign co~npanies, quite naturally, dominated the indust~yand the bulk of the business remained in their hands till 1952. Realizing the need for promoting Pakistani companies to hand ever growing insurance needs in the country consistent with the industrialization and to check on the drain of funds by the foreign companies, the government of Paki- stan decided to provide complete aid full support to insurance in- dustry. Accordingly, in 1953 PIC was established under the Insu- rance Act 1952. The establishment of PIC was the beginning. The industry started to grow. New companies were floated and old ones consolidated their position and started expanding. By 1960, the number of Pakistani insurance companies increased from 7 to 26 reaching the figure 47 by 197 1. During the same period the number of foreign companies declined from 77 in 1947 to 25 in 1972. In march, 1972 Life Insurance was nationalized under a presiden- tial order. Under the government management a State Life Insu- rance Corporation (S.L.I.C.) was set up. The other organization writing life insurance was Postal Life Insurance Corporation (PLIC). At the time the government took-over, the assets of life fund amounted Rs. 1.3 billion, annual receipts of Rs. 337 million and the total number of policies in force was 521,275. Under the State management the life insurance business recorded a constant rise. In 1994, the life fund,was Rs.33,533 billion, annual receipts Y Rs. 10.081 billion, investments Rs. 32.578 billion, total business enforced Rs. 379.640 billion and the total number of ordinary life policies enforced 1.78 million. Group policies enforce were over 5,100 million. However, in August 1990, the life insurance business was de- regularized as a result of which, apart from state controlled SLIC and PLIC, two local life insurance companies were registered in the private sector. The government of Pakistan allowed employment of foreign capital in insurance in 1993 to underwrite life insurance business in Pakistan. As a result of this approval two foreign insu- rance companies, American Life Insurance Company and Commer- cial Union Life Assurance Company registered with the depart- ment of insurance in 1995 and 1996 respectively. At present there are 66 private insurance companies operating in Pakistan, out of which, 04 insurers are transacting life insurance business. The remaining 62 insurance companies of which 52 local and 10 foreign insurers are doing general insurance business in the country. Section I1 Efforts of Islamizing Insurance in Pakistan Insurance contract is an important contemporary issue which has attracted the attention of Shari'ah scholars and Islamic economists. In Pakistan many scholars wrote articles and books regarding the Islamic status of insurance business. But very little work is done on the alternative system of insurance which should be satisfying the Islamic principles and objectives. Only two efforts are Known by now, one is by Mufti Muhammad Shafi, an eminent Shari'ah schol- ars and other is by Council of Islamic Ideology of Pakistan. Mufti Muhammad Shafi, while responding to a questionnaire from Maj- lis-e- Tahqiqat Shari'yah Lucknow in 1964, not only analysed the existing insurance business but also proposed an alternate model of Islamic ~nsurance.(~')The Council of Islamic Ideology (C.I.I.) Pa- kistan reviewed the existing insurance practices and suggested an Islamic alternative. The council examined the laws governing the insurance business in the country in 1984. It analysed eleven such laws and expressed its opinion about them in a brief report to the government, which was in March 1984.(~l)The council further de- cided to constitute a working group to analyse the existing system and frame a new system of surety and assurance in accordance with the Islamic teachings. The working group should include, besides the Ulama members of the council, economists, the heads of the government insurance companies and other insurance experts. The working group prepared a preliminary report on insurance, but due to the expiry of the tenure of the council, this effort was discontin- ued. In 1990 a new council came into existence which decided to form another group to complete this task. The working group comprised of six members of the council and four representatives of major in- surance corporations. The group also benefited from the expertise of around twenty scholars and insurance experts to understand the nature and functioning of the present system and to develop an al- ternate system. The group prepared a report in 1992 and submitted for consideration by the government. In this report the group re- view the history of insurance and its present forms. It also looked into the status of insurance from shari'h point of view and found that in its present form it involves the elements of Riba, speculation and gambling. The group also has reviewed the functioning of Is- lamic insurance (Takaful) companies, working in different Muslim countries, for developing a practical model for Islamic Insurance and suggested an alternate system based on the concept of Mudara- bah and Waqf. But no practical step has been yet taken for the Is- lamization of insurance. The present government has shown its interest towards Islamization of the Pakistan economy and formed a commission to develop a scheme for this purpose. The Commission for Islamization has al- ready submitted its report on Islamization of Financial system in Pakistan. The next area of interest for the commission is Islamiza- tion of insurance business in the country. For this purpose the com- mission has assigned the task of preparing a blue-print for Islamiza- tion of Insurance to a very senior and experienced person in insurance business, with the help of Ulama and experts. The report is still to awaited.

C.1.1.'~VIEW POINT REGARDING INSURANCE: Having analysed the arguments of both proponents and opponents of insurance, the Council of Islamic Ideology Pakistan expressed its view regarding insurance that it is in conflict with the injunctions of ~slrun.(~~)The major objections raised against existing insurance contract u-e: 1. There is an element of Gharar in these contracts, 2. The element of gambling is prcsent in its extreme form, 3. There is an element of interest in these contracts, and 4. Such arrangements come within the definition of Akl-e-Amwal bil Batil (Unlawful acquisition of otllers property) The council also reviewed the functioning of Takaful companies in some of the Muslim countries, like Bahrain, Sudan Saudi Arabia etc., to consider as to whether any of them could serve as a model for Pakistan. Since sufficient details were not available about Ma- laysian Islamic Insurance Company, the council did not consider it in their discussion. As some of the members, specially the Ulama, were strictly of the view that the insurance business should be on the basis of mutual help and without any intention of making profit, the council did not find any of the experiences suitable to be adopt- ed for Pakistan. The opinion of the council is as follows: The working group was of the view that any insurance arrange- ment, which was not of the mutual type, will not be acceptable in Islam. Thcre was also a general agreement that since the constitu- tion of the various Islamic Insurance Companies was not based on mutual sharing of risks and the shareholders and policy holders of the companies under review were different entities, non of these could be adopted to serve as a model for the working group. Most of the members of the working group agreed that insurance should not be a money-making source for the organizers and should pro- vide cover against those risks only which should be covered in pub- lic interest, i.e. insurance should cater to the requirements of the public and not to the requirements of the privileged class.(23)

Section IV Review of The Insurance Act 1938 The insurance business in Pakistan is governed by the Insurance Act of 1938 which was enacted by the British rulers in India. This act mostly deals with the establishnient, registration, management, and other administrative matters of insurance companies. The Act also defines the responsibilities of different authorities, responsible of organizing insurance activities in the country. Although the whole Act is devoid of Islamic values and spirit, some of its sec- tions need special mentioning. In .the presence of these sections no Islamic insurance company can perform its business according to Shari'ah principles. These sections mostly dealt with deposits, in- vestment and compensation to the policy holders. In each of these activities element of interest is involved. We shall discuss these sections and suggest changes required to establish insurance busi- ness on Islamic grounds. 1. The Shari'ah scholars in the sub-continent firmly believe that the true alternative for the commercial insurance are Mutual and Co-operative insurance, but Section 2-C, sub-section 2 of the act makes it difficult to start a mutual insurance business. The sub- section states as follows: No Mutual Insurance Company which was not registered, before the commencement of the Insurance (Amendment) Ordinance, 1958, for any class of insurance business, shall be registered for any class of general insurance business and no Mutual Insurance Company which was registered, before such commencement, of any class of insurance business, shall be registered for any addition- al class of insurance business unless such company satisfies such conditions as may be prescribed.(24) It is required to change this clause and provide convenience in starting Mutual insurance companies and Co-Operative societies in the country. 2. Section 7 of the Act deals with deposits, every insurer has to keep with the State Bank of Pakistan, in the form of cash or gov- ernment securities or both. An interest will be paid on these deposit at the time of returning them to the insurer. Sub-section 8 states that: A deposit made in cash ...... , be returnable to the insurer in cash in any case in which under the provisions of this Act a deposit is to be returned; and any interest accruing due and collected on securi- ties deposited under sub-section (1) or sub-section (2) shall be paid to the insurer.(25) This rule is general aid applicable to all kinds of insurance busi- nesses. If Insurance industry is to be organized on Islamic princi- ples, or some Islamic insurance companies are to be established in the country, this condition of maintaining deposits need to be changed suitably so that the element of interest be eliminated. 3. Section 27 of the Act deals with Investment , Loans and Man- agement. On the investment side, government has restricted the in- surers to invest the available funds according to its directives and a limited freedom is available to the insurers. Sub-section 2 provides the guideline for the insurers as follows: The investment requirement under sub-section (1) shall be made in the following manner, namely: i) thirty per cent. of the sum referred to in the said sub-section shall be invested in Government securities; ii) such further percentage of the said sum, not being more that thirty per cent. thereof, as the Federal Government may, from time to time, by notification in the official Gazette, fix in this behalf, shall be invested in Government or other approved securities ; and iii) the balance shall be invested in approved securities or, subject to such restrictions as may, by the notification in the official Ga- . zette, be imposed by the Federal Government in approved invest- ment :(26) Presently the Government securities are interest based instrument for public borrowing. To establish the insurance business on Islam- ic principles either the government should remove these restrictions on the investment, or issue Govermnent securities which are free froin the element of interest. Even from efficiency point of view, these restrictions are unnecessary. They limit the scope of earning more profit by investing in other available opportunities. 4. Section 29 deals with the loans and advances to the agents and employees. Sub-section 8 shows that these loans will be given on some interest. The sub-section states that: the loan is of such amount that the instalment of capital and interest does not exceed one-fourth of the basic salary 'of the employee or one-fourth of the renewal commission or over-riding commission of an agent or an employer of agents, as the case may be during the year(27) The provision of such kind loans to the employees has two prob- lems, 1. An element of interest is involved in these loans or advances which is prohibited. 2. While working in the capacity of Mudarib, an Islamic insu- rance company can not extend such kind of loans to help its em- ployees, . The funds in its custody will be considered as Amanah and can only be used to bring maximum possible benefits to the policy holders. 5. Section 47-B deals with the late settlement of claims and asks the insurers to pay a monthly interest to the policy-holder for the delayed payment of the compensation. Section 47-B states that, (1) Where payment oil a policy ...... if he fails to make the pay- ment within a period of ninety days from the date on which the payment becomes due or the claimant complies with the require- ments, whichever is later, pay interest as specified in section (2) on the amount so payable ... This restriction or penalty is good to safeguard the interest of the policy-holders but involvement of iilterest can not be allowed in any circumstances. Government should provide some other Islami- cally approved mechanism for this purpose.

Section V A Proposal for Islamization of Insurance Some Conceptual Issues Before discussing the proposal it looks appropriate to discuss some conceptual issues people often raise about insurance froin an Islam- ic perspective. The first issue is that will there be any need for insu- rance in an Islamic state or the Bait-ul-Ma1 and other welfare insti- tutions will be enough to take care the people. The second issue is that whether the insurance business should be organized in public sector or private sector can also be allowed. The third issue is that even if private sector is allowed will it be a mutual company or a private limited company. Now we will discuss all these issues in some length to define the Shari'ah position about them. Regarding the first issue some religious scholars(28) are of the opinion that in an Islamic setting, state will be responsible to fulfil the needs of every citizen from the Bait-ul-Mal. Some other spe- cialized institutions like Wasaya, A'qila, etc. will also be available, providing protection against worries, for which people purchase in- surance policies in present times. Therefore they conclude that there will be no real need for insurance business in an Islainic sys- tem. This argument apparently looks convincing, but does not cov- er a wide range of risks of present time specially the business risks. The Bait-ul-Ma1 mostly provides financial support to those who are liable to receive Zakat, but it is not necessary that every individual, after having some loss, may have gone to that level of poverty to be taken care from Bait-ul-Mal. For example if a person loses his car due to theft or accident, and still financially sound, may not be pro- vided any help from Bait-ul-Ma1 to compensate the loss. Insurance busine. PI. ides an apport unity to pay a small amount and re- ceive co~~:pensationin case of the loss. If this business is working according to Islamic principles, then in my view it will further strengthen iIle welfare role of the Isl:mic state. The second issue is raised by most of the Ula~naof sub-continent and same opinion is held by the council of Islamic Ideology Paki- tan(^^) that only the state, being the guardian of all the citizen, can run this business from welfare point of view and not to earn profit. The logic for this view is that people purchase insurance policies to protect them selves from the expected loses. If some one is making it profit earning activity then he is exploiting the needs of the peo- ple and earning out of their miseries instead of helping them. If we accept this argument, then it will be true for many other professions (e.g. physicians, lawyers etc.) as well. In my view, only the element of profit does not make this business un-Islamic. If the nature and practice of business does not violate any Shariah principle then it mus' be considered permissible because the general rule is, permis- sibmty not the prohibition. Third issue is about the nature of insurance fir~n.In various semi- nars and scholarly works this view is presented that the commercial insurance is not allowed and the Isla~nicsubstitute is cooperative or mutual insurance. Here again the similar logic is working as we have discussed in previous issue that profit earning is not allowed in insurance business, and if there is some profit, it must be distrib- uted among the policy-holders only. The council of Islamic Ideolo- gy Pakistan did not adopted the Malaysian experience due to the objection that policy-holders and share-holders are different people. Here again we find the same problem as discussed previously that we can only decide that which business form is more desirable and preferable from the welfare point of view. We can not say that a commercial insurance, even if it is being managed according to Is- lamic business principles, is prohibited. To say this we need some Shari'ah injunction which I afraid not found. Many eminent relig- ious scholars, like Mufti Muhaminad Shafi, Syed Abul Aa'la Mau- dudi etc., have given suggestions for transforming the existing commercial uisurance in an Islamically acceptable business. The Takaful companies are working under some Shari'ah supervisory boards and commonly accepted as Islamic insurance companies. We can conclude, on the basis of all these evidences, thaf the stluc- ture and nature of insurance companies can be decided according to the situation and priorities. Role of Government in Islamization Government is to perform an active role in Islamization of insu- rance in the country. Islamization may take place in two ways. The first way is to restructure the whole insurance sector on Islamic foundations and the second is to allow some Islamic insurance companies or some old firms to transform their business on Islamic lines keeping the existing set-up as it is. These two approaches re- quire different strategies on part of the government. In the former case, the government may promulgate a regular de- tailed and codified law to reorganize the insurance industry in line with Shari'ah principles. This law should reflect the true spirit of mutual help and cooperation. All the elements making the present insurance practices un-Islamic (e.g. interest, gambling, gharar) should not be allowed in any circumstances. Some Islamic coun- tries such as Malaysia and Sudan, have already enacted such laws which can be used as guiding examples. However if the government opts the latter approach, then it must make suitable changes in the existing insurance act to create fa- vourable environment to new companies to be established on Is- lamic principles. Some laws, e.g. those which have been reported in section four of this paper, are hurdle for running the business ac- cording to Islamic principles. More over the government must fa- cilitate and encourage these companies providing them incentives such as tax exemptions in early period of establishment. This may help the existing conventional insurance companies to iestructure their business on Islamic lines. A time frame may also be decided by the government for complete transformation of conventional In- surance business into Islamic Insurance. Another function which the government should perform is re- insurance arrangements. Presently insurance companies, working in Pakistan, are having two kinds of re-insurance arrangements, i) with the Pakistan Insurance Corporation, ii) with foreign insurance companies. In both of these arrangements, the insurance company enters into a similar type of contract with the re-insurer, as one be- tween an individual and the insurance company, including all un- Islamic element of insurance which have already been discussed earlier. Government is arranging reinsurance through the Pakistan Insurance Corporation in the existing set-up. For extending this ser- vice to the Islamic insurance companies government may establish a Fund, as proposed by the Council of Islamic Ideology, and all Is- lamic insurance companies should contribute a proportion of their written premium in this Fund. This proportion may be different for different policies. The objective of this fund should be to help the insurance companies in paying the claims. A proportion of this fund may be invested in profitable ventures according to Islamic principles and profit can be shared between the fund and the insu- rance companies. Insurance Company The required thing from an Islamic insurance company is the avoidance of prohibited elements in their contract and use of funds which are interest, gharar and confiscation of others' money with- out any valid reason. Element of interest can be avoided by accepting the contribution from the policy holders in the form of investment not as loan be- cause otherwise any discrepancy between the money received and given back is con1;idered as Riba. The insurance company will in- vest the available funds in various profitable ventures and at the time of maturity of the policy not only pay back the actual contri- bution but also some share of profit calculated on the basis of a pre- announced proportion. But as we know that objective of the indi- vidual ( organization), purchasing an insurance policy, is not to earn some profit on investment but to get the security against some expected loss in the form of compensation. This loss may be many times more than his (its) premium contribution. The amount of compensation may not be predetermined in most of the cases as it depends on nature and extent of the loss. If the compensation is left undecided in the contract it will bring gharar in it which will inval- idate the contract according to majority of the Fuqaha. Element of gharar is only acceptable in unilateral transfers like gift or charity but not in bi-lateral transactions which are called as Uqood-al- Muawazat. This problem could be solved by arranging a special fund and ask- ing all the policy holders to contribute a specific amount in this fund as a gift(Tabarru) along with premium contribution. This fund can be used to provide some additional help after returning the to- tal investment plus share of profit of the policy holder in case of oc- currence of the unhappy event. As this amount will be given as a gift or help, presence of Gharar will not invalidate the transaction. The amount of contribution to this fund may be different for differ- ent policies depending on the expected amount of loss. In the poli- cies where loss is more expected company can demand relatively more contribution compare to another policy where loss is less like- ly. The insurance company can invest a portion of this fund in prof- itable projects after maintaining some reserves to meet the needs of the policy holders. All the profits will go to this fund and no share will be given to the policy holder. However the company can re- duce the amount of contribution on the renewal of the policy if it is f. earning good profit. This is a brief proposal for Islamization of insurance business in ' Pakistan. We can easily avoid the prohibited elements in insurance business, such as riba and gharar, and can manage this business ac- cording to Shariah approved business principles.

End notes: 1. Mufti Mohammad Shafi, "Bima-e- Zindagi(Life Insurance)", Dar-ul-Isha'at Karachi, pp. 18-23. 2. Maududi, S. Abul A'la , "Ma'ashiat-e-Islam", Islamic Publi- cations Limited, Lahore 1988, p.408. 3. Khurshid Ahmad, Studies in Isla~nicEconomics, The Islam- ic Foundation, Leicester, 198 1, p.2 16. 4. Mustafa Zaid, "al-Tamin", Majallah al-Buhuth al- Islamiyyah, Idarat al-Buhoth al-Iluiyyah, Riyadh, Vo1.19- 20. 5. Ibid 6. Ibid 7. Ibid 8. Ahmad Fahmi, "Al-Tamin" I'nd al-Nawazil wa-al-hawa'ij", paper presented at the First International Conference on Is- lamic Economics, Makkah, 1976. 9. Hussain Hamid Hassan, "Al-Ta'min wa Mauqif al-Shariah Minhu, paper presented at the First International Confer- ence on Islamic Economics, Makkah, 1976. 10. Muslihuddin," Insurance and Islamic Law"1slamic Publica- tions LImited, Lahore, 1979. 1I. Jalal Mustafa, "Al-Ta'min wa ba'dh al-Shubhat", paper presented at First International Conference on Islamic Eco- nomics, Makkah, 1976. 12. Mustafa Ahmad Zarqa, "Nizam a1 ta'min wa Mawqif a1 Shari'ah minhu" paper presented at First International Con- ference on Islamic Economics, Makkah, 1976. 13. Shaikh Ali al-Khafif, "al-Tarnin wa hukmuho ala Mabadi' al-Shari'yyah wa Usuliyyha al-a'mmah, paper presented at First International Conference on Islamic Economics, Mak- kah, 1976. 14. Majallah al-Buhuth al-Ismiyyah, op.cit. Vol. 19, 20. 15. Siddiqi, M. Nijatullah, "Muslim Economic Thinking", In- ternational Centre for Research in Islamic Economics, Jed- dah, 1981, pp. 26. 16. Siddiqi, M. Nijatullah, "Insurance in an Islamic Econo- my", Islamic Foundation, U.K. 1985. 17. Siddiqi, M. Nijatullah, "Muslim Economic Thinking", op.ct. pp.26. 18. Ibid 19. Abdul Mannan, "Islamic Econornics:Theory and Practice".

20. Mufti Muhammad Shafi, op.ct. 21. Council of Islamic Ideology Pakistan, " Council's Eleventh report on Insurance and Insurance Laws", 1984. 22. Council of Islamic Ideology Pakistan, "Report on Islamic Insurance System, 1992, pp. 29. 23. ibid. pp. 44. 24. The Insurance Act, Mansoor Book House, Lahore, 1996, pp. l8,lg. 25. ibid. pp.33-37. 26. ibid. pp. 49,50. 27. ibid. pp. 56. 28. Mufti Muhammad Shafi, op.ct. pp. 44-47. 29. Council of Islamic Ideology Pakistan "Report on Islamic Insurance System, 1992. ABSTRACTS

Israeli Traditions With No Adverse Comments

Dr. Mohammad Ahmad

This research paper makes a systematic study of a kind of Israeli tradition that has been termed by scholars as maskut anhu', the Israeli reports about which no ad- verse comments have come down to us. This kind of reports lies somewhere between the two extreme; those which are consistent with the explicit teachings of the k Holy Qur'an and the Traditions and those which are not. The paper also reviews the attitude of our religion towards such Israeli reports. It specially focuses on the attitude of the Prophet as reflected in his biography and that of his Companions, chief among them being Umar and Ibn Abbas; and prominent Muslim scholars such as Ibn Taymiah, Ibn Kathir, Khairuddin la-Biqa'i and Ibn Hajar. The paper also makes a survey of the opinions of the contemporary Muslim scholars on such reports with ample quotations from their works. Finally it highlights the recommendation of the majority of scholars to refrain from quoting such reports in support of a particular view, while some others permit this if they are based on genu- a ine authority. Concept of Freedom in The contemporary Egyp- ;e tian Discourse

Dr. Ahmad Gad

Freedom is a pre-requisite to progress, enlightenment and renaissance' and so its importance for human being. It has always been considered a basic human right since its in- ception throughout the history viz-a-viz authority, state and law. Properly speaking, man cannot be conceived as man un- less endowed with freedom in all its dimensions: social, mo- ral, political and religious. The contemporary Muslim think- ers are fully conscious of the necessity and significance of freedom in the achievement of human progress and develop- ment. The objective of this paper is to examine the meaning and significance of freedom in all its diverse dimensions: ' politi- 4 cal, social, economic and religious among contemporary Muslim thinkers in Egypt. Notwithstanding the diversity of trends ranging from purely traditional to liberal to reconcilia- tory which combines the two opposite trends: Islamic and western in an attempt to integrate the western concept of free- dom and human rights into Islamic cultural legacy with great- er objectivity and keeping in mind that the future always holds the possibility of unfolding fresh avenues of thought for the analysis of Islamic discourse in Egypt. This analysis, which may or may not agree with the researcher himself, may be correct because it reflects the reader's experience and point of view on such analysis which may vary form reader to read- er' more importantly, discourse it is in a state of continuous movement which results in its instability. Besides, it may cause the loss of philosophical dimension in the strict sense of the word. The paper also aims at exploring the elements of original- a ity and creativity in the writing of the Muslim intellectual in Egypt while discussing this concept and its significance in the achievement of contemporary Islamic renaissance. Linguistic Method in the Interpretation of the Holy Qur'an e (A case study of Aisha Abdul Rahrnan 'Bint al-ShatiA Miss Aliya Akram

This research begins with a biographical sketch of Ai- sah Abdul Rahman, a renowned Muslim woman scholar whose contribution to the commentary of the Qur'an is a typical example of applying linguistic principles to the understanding and interpretion of the Holy Qur'an. The writer in particular focuses on distinctive characteristics of her academic endeavour in the light of her numerous works. This is followed by a critical examination of her meth- odology applied to the interpretation of the Qur'an. In this regard, he refers to the original sources and princi- ples that underlie her method of deriving conclusions ' from similar verses, pursuing their linguistic study, con- sidering the background of the relevant verse and the chapter and the context in which it has been mentioned. He also examines different aspects of her study of a par- ticular Qur'anic text, explaining the rules related to a let- ter, word, expression and style. Methodologies Applied to the Editing Of Classical Islamic Works

( An Applied Study of Numerous Works Editing Imam Tayyibi 's ALTibyan fi a1 'bayan) Dr. Moharnmad Rifat Ahmad Zangeer This research paper evaluates the various efforts made to edit Imam al-Tayibi' s Al-tibyan fi al- bayarz' a rhetorical and linguistic work of great historical significance. The author strives to make a comparative and analytical study of the three recent works devoted to the editing of the above work and the principles underlying their approach- es in its editing.. The topics of discussion may be summed up in two major points; an objective study of the book itself followed by its editing in keeping with the usual practice in the edit- 4 ing of such books. The first section devoted to the study of the work itself aims to make a comparative analysis of the contents of the three works referred to above. The comparison has been made with reference to the title of the work, the au- thor and the attribution of the work to the author. These common elements have been reflected in all the three works while discussing the author's name, the attribution of the present work to the author, his teachers, students and contributions, his relation with Abd al-Qahir and Al- Sakaki, various manuscripts and the reasons which prompted the editing of the book. The second section of the research deals with the ele- ments involved in the editing of a manuscript. These in- clude verification and accuracy of the text, biographies of distinguished personalities referred to and preparation of various technical indices -V-iiJ.&l&J~iiEa~*,~

Drawing Word Pictures . 4 Dr. Abu Al-Qasim Rashwan

The research is based on a study of the impact of rhythm in pre-Islamic Arabic odes. The poets, through their poet- ic genius, have further enhanced the impact by use of various phonetic instruments scattered throughout their works. This research on rhythm in pre-Islamic poetry dis- cusses the essential elements of internal rhythm such as phonetics, words, syllables or rhythmic units, etc. It fur- ther examines the extent to which these musical elements are linked with general atmosphere and their role in the clarity of meanings as well as their interaction with emo- tion, thought and image. The research conducts this study by citing numerous examples from verses on women and horse.