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Could it be argued that the elimination of uncertainty - i.e., peace of mind - is something that has value?
Is this similar to how Jewish law deals with the question of charging interest?
Jewish law has two separate provisions regarding interest. Jews are not allowed to charge interest to other Jews, and the prohibition is much stronger than the Islamic riba laws; devices such as handling fees and delayed sales are not allowed. Jewish law does, however, recognize a device called heter ikra that converts a loan into an investment partnership in a manner similar to modern Islamic mortgages.
In transactions with gentiles, Jews may charge or pay interest, but usurious rates are forbidden. Usury is defined strictly; Maimonides held that a Jewish banker cannot charge a rate of interest higher than necessary to earn a basic living. Some of the medieval German rabbis were less strict, reasoning that Jews were taxed more highly than other people so they were allowed to charge higher interest rates to the princes who taxed them.
Thanks for the explanation of intangibles in Islamic finance. From what I've been able to find, the weight of authority is against insurance with the exception of takaful, but I think the peace-of-mind formulation might be an alternative way to look at the question.
I'm not an islamic scholar at all , but here is my thought.
You are getting something from the agreement. You are getting a promise. If X happens (be it a fire or something is stolen, your car wrecked etc), you will get a payment. You will be reimburse. You are paying for the promise which is cheaper than the payment because otherwise it would be of no use to you(you would be better off keeping your money to guard against that eventuality).
Consider this rather simplistic example. I am worried for the safety of my home, so I hire someone to guard it. He lives in the home and I pay a little something on top of free rent. For each day, that no one even ATTEMPTS to break into my house, am I being cheated out of the money I pay him ? After all, no one even attempted to break in, so I would have been no worse with out a guard.
I don't know Islamic law, but I would say that there must be an acknowledgement that fact that he was there is of some value.
He is similar to insurance, there is value in the promise even it is never used.
As I said to Jonathan, Islamic law is not against giving money for something intangible, as long as the two parties can agree on the value of the intangible thing. What is important is that the transaction is drawn up in such a way that both parties know exactly what they are paying for and what they are getting and they feel that they are each getting a fair deal. The resulting arrangement may look very similar to a non-Islamic arrangement (as the extra fee for deferred repayment might look similar to interest on a loan) but the wording of the contract is different.
It is also possible to make a contract that involves some degree of risk and uncertainty about whether the venture will succeed, but in this case there must be a cooperative profit-sharing arrangement so that if the venture doesn't work out, one person is not stuck in a financial hole and also having to pay back a huge debt while the other person gets all their money back. Instead, both parties share the risks and take losses or gain profits in proportion to their risks.
From my understanding of takaful or Islamic cooperative insurance, it is partly a rewriting of the contract to allow for intangibles like peace of mind and partly it involves setting up a risk-sharing mechanism like I described.
Muslims are not against the benefits of insurance; however they want to make sure that the contract is completely fair and no side ends up getting more than they gave.
Most people I know think very poorly of their insurance companies, they feel that the insurance company seems to be out to stick it to them in premiums then find any excuse to withhold coverage when they need it. What they seem to be saying is that they feel the insurance contract isn't entirely fair but that it's stacked in the favor of the insurance company.
Is it really so alien that Muslims would object on the same grounds and try to come up with an alternate arrangement that brings the benefits of insurance without the problems of the current arrangement?
Subject: Re: Islamic insurance
Muslims are not against the benefits of insurance; however they want to make sure that the contract is completely fair and no side ends up getting more than they gave.Is it really so alien that Muslims would object on the same grounds and try to come up with an
alternate arrangement that brings the benefits of insurance without the problems of the current arrangement?
Not at all, In fact the way you have explained it, makes it seem almost like a simple difference in terminology more than anything else. In my mind, giving someone a payment for the use of their money is what interest is.
People gripe about their insurance, sometimes for good reason and sometimes just because they don't like spending money (but they are happy when they have it).. I suspect that despite, the effort that goes into insuring contracts are fair, Muslims occasionally gripe about their insurance premiums too.
Wanting a fair contract is definitely a wish that transcends religious boundaries.
Subject: Re: Islamic insurance
That's really the point I was trying to make by this. I think the differences are a little deeper than terminology, but they are by no means as deep as people often think when they hear about Islamic economics. I would say its more a difference of mindset or approach. I think that the same principles are at the root of many Western practices but sometimes this has gotten buried or people have gotten too far away from it. By looking at Western practices in a new light we can discover anew what they were meant to be about.The problem is that people everywhere tend to go for the easy buck, whereas religious and other moral principles bring us back to what's right and fair.
Islamic rules should be compared to those of other religions, not to the Western system. I think they're probably pretty similar. Jonathan has already noted the similarities to Jewish law.
Subject: Re: Islamic insurance
Jonathan has already noted the similarities to Jewish law.I find the similarities in Jewish and Islamic law in this case and the similarities between the ideas of kosher and halal food to be a tragically funny irony with regards to the Palestinian/Israeli conflict.