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Islamic finance accelerates into motor policies
First it was Islamic current accounts, then mortgages and investment funds, and now we have a motor insurance product that conforms to Islamic law, or sharia.
This move will be welcomed by many of the two million British Muslims looking to buy insurance cover aligned with their faith. But it could also prove popular for non-Muslims who find the notion of an ethical or co-operative insurance product appealing.
Unlike conventional insurance, where risk is transferred from the policyholder to the insurance company, halal [permissable] insurance, or takaful ("guaranteeing each other"), requires all participants to share risk equally. Instead of premiums, participants pay contributions which, as with ordinary insurance, are calculated on the presumed risk of the individual and how likely they are to claim. These contributions are then pooled in a takaful fund which is invested in strictly halal activities. There is also a Shariah Supervisory Committee, made up of sharia scholars, to oversee all activities and to ensure that the whole process is consistent with Islamic principles.
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