Islamic insurance is founded on the cooperative principle. Policyholders premiums, which are considered to be donations, form the general fund from which any claims are met. At the end of the year, any remaining cash surplus (after deduction of expenses) is not kept by the company or its shareholders, but returned to the policyholders in the form of cash dividends or distributions.
In this respect, Islamic insurance business is different from the conventional form in which the shareholders, rather than the policyholders, benefit from the profits generated by the sale of insurance products and services and by insurance investment assets .
Insurance investment assets which are represented by insurance funds that accumulate over the retained surpluses reserves, provisions and so on, are invested by the companys shareholders on behalf of the policyholders. The shareholders are rewarded with a percentage of the profit on these investments, as distinct from the insurance business.
It follows that Islamic insurance is founded on the principle of a separation between the funds and operations of shareholders and policyholders, thereby passing the ownership of the insurance funds and operations to the policyholders.
An area of major growth now is the Islamic alternative to life insurance, known as Takaful. This is fully compatible with Islamic principles; the Prophet (peace be upon him) said: it is better to leave your heirs rich than to leave them poor and needy asking others for help. The main purpose of this form of insurance is to protect families from the financial hardships that may occur if the breadwinner goes unexpectedly or is permanently disabled as a result of illness or accident. And as governments in many parts of the world roll back the provision of state-funded welfare, Takaful covers look set to play a growing part in providing security for our loved ones.
Since its foundation, Qatar Islamic Insurance Company has developed the widest range of insurance products and services compatible with Islamic Sharia.