Takaful: Here’s how you can help bring halal insurance to the UK
Insurance is one of those thorny issues for Muslims. It's tricky to navigate the Western world without taking out insurance.
Most scholars agree that conventional insurance is incompatible with the Sharia as it includes two key elements prohibited in Islam - riba (interest or usury) and gharar (ambiguity or uncertainty).
But there is a long-standing halal alternative Muslims can use — takaful.
Takaful is a Shariah-compliant insurance system based on mutual cooperation, assistance and risk-sharing. It's existed in its modern form for over 40 years.
The takaful market reached $30 billion in 2022, driven by Muslim countries such as Turkey, Iran, Saudi Arabia, and Southeast Asia. But no equivalent service exists in the West, despite a growing Muslim population.
One organisation hopes to change that by introducing takaful insurance into the UK market. It's called Takaful Ltd. and is led by Islam Channel's CEO Mohamed Harrath.
The group is currently canvassing opinions from Muslims about halal insurance to help bring the solution to market.
"The survey is important because we want to support the project with the backing from the community," said Mohamed, the CEO of Takaful.
It's currently in discussion with regulators (the Bank of England and Financial Conduct Authority) to get authorisation, which will allow it to bring the product to market next year.
"The survey will be a good way to understand the needs of UK Muslims but also show regulators the demand for the solution," adds Mohamed.
The demand for takaful in the UK
Muslims choose conventional insurance because no halal option is available — and the organisation wants to change that status quo.
"Insurance is used in many aspects of our life, from motor vehicles to property and businesses. While some view it as problematic Islamically, many see it as unequivocally haram," says Mohamed.
"Generally, Muslims follow the guidance of the ulema (religious scholars) on matters like this, who view it as haram."
In 1985, the Grand Council of Islamic Scholars of the Organisation of Islamic Cooperation (OIC) deemed conventional insurance incompatible with the Sharia. It also formally allowed takaful as the Islamic alternative to traditional insurance.
"We have an alternative that exists and functions very well in many Muslim countries. So the natural next step is to say why don't we have it in the UK, where we have a large and growing Muslim population?"
Research by Pew predicts that the Muslim share of the population in England and Wales will reach 16.7% by 2050. According to the 2021 Census, Muslims in England and Wales account for 6.5% of the population.
The UK insurance market's total premium income is £230bn, making the potential Muslim share around £15bn (based on the 6.5% population).
The global Islamic finance industry has grown rapidly in recent decades - and the UK is one of the leaders in the industry outside the Muslim world.
Given the UK's standing when it comes to Islamic finance, Mohamed sees no reason why it can't be the first country in the Western world to offer takaful to its Muslim citizens:
"Insurance is considered haram, but there is a well-established halal alternative. As a community, we can demand and create halal options for our financial needs in the UK — and that's what we're hoping to help do with our work."
A quick guide on how takaful works
- Customers (policyholders) of the Takaful business agree to pool their contributions and share the liability of each policyholder.
- As with mutual insurance, policyholders share the insurance risk and profit and loss of the Takaful business (risk is not transferred as occurs in a conventional insurance company).
- Funds must be invested in Sharia-compliant assets (e.g. investments can't be made in assets that pay interest nor are deemed haram, like tobacco, alcohol, gambling etc.)