Insurance in Islamic thought : The issue of riba or interest
The Council of Islamic Ideology’s report quotes, verse 279 of Al-Baqara:
For, upon a claim on an insurance policy the insured receives more than what he has paid (the premium) to the insurer, the excess amount constitutes ‘Ribā’. Usury is condemned and prohibited in the strongest possible terms. I cite below four verses,2:75-76, 3:130, 4:161 of the Holy Quran and the meaning with commentary, about ribā:
Below is the commentary on the verse 2:275 of Al-Bakara:
“Usury is condemned and prohibited in the strongest possible terms. There can be no question about the prohibition. When we come to the definition of usury there is room for difference of opinion. Hadhrat ‘Umer, according to Ibn Kathir, felt some difficulty in the matter, as the Prophet (PBUH) left this world before the details of the question were settled. This was one of the three questions on which he wished he had had more light from the Prophet. Our ‘Ulmā’, ancient and modern, have worked out a great body of literature on Usury, based mainly on economic conditions as they existed at the rise of Islam”.
“An apt smile: whereas legitimate trade or industry increases the properity and stability of men and nations, a dependence on Usury would merely encourage a race of idlers, cruel blood-suckers, and worthless fellows who do not know their own good and therefore akin to madmen.
“Owing to the fact that the interest occupies a central position in modern economic life, and especially since interst is the very life blood of the existing financial institution, a number of Muslims have been inclined to interpret in a manner which is radically different from the understanding of Muslim Scholars throughout the last fourteen centuries and is also sharply in conflict with the categorical statements of the Prophet (peace be on him). According to the Islamic teachings any excess on the capital is ribā (interest). Islam accepts no distinction, in so far as prohibition is concerned, between reasonable and exorbitant rate of interest, and thus what come to be regarded as the difference between usury and interst; nor between returns on bonus for consumption and those for production purposes and so on.”