Cooperactive Insurance

Insurance is one of the means people have used for ages to deal with the consequences of damages, risks, and disasters which befall them in order to alleviate their impact or to avoid them completely. Insurance has developed to cover most economic activities such as  commerce, industry, and agriculture. People resort to insurance even though it might not be compulsory by law. For example, insurance against public liability resulting from car accidents is compulsory in reality because people have no means, except insurance, as an 

effective guarantee against risks to which they are exposed.. 

Cooperative Insurance is generally based on the concept that the negative impact of a specific incident is distributed among a group of persons instead of making the person who experienced the loss to bear its results alone. The means to achieve this is to establish a common fund to which everyone exposed to a specific risk may contribute in such a way that indemnity will be paid from that fund. In this type of insurance, the Insured seeks guarantee from a group of persons who are participants in the insurance. At the same time he supports other members when they are faced with losses. Members who share in this insurance insure each other's losses on the basis of legitimate cooperation 

and Takaful.

Cooperative Insurance has two types: the first is the old simple type which takes the form of a Cooperative Society comprising a specific group of persons to avert risks resulting from a specific incident. Each member pays an amount of money in order to compensate any member exposed to a risk insured against. The compensation is settled from the total sum of premiums. If an amount of premium is left, it will be repaid to the members; if premiums are not sufficient,then additional premiums will be collected from them. This kind of Cooperative Insurance is  called Simple Cooperative Insurance,which is the subject of this chapter. The second type of Cooperative Insurance is the Simple Cooperative Insurance.When this type is managed by a specialized company in its capacity as an agency , it is called the Islamic Insurance Company. We have called this kind of insurance Compound Cooperative Insurance.

Functions of Cooperative Insurance 

1. It achieves security for the Insured :

If properties are insured and the risk occurs, the insurance company gives to the Insured the compensation agreed upon between them in the insurance contract. This compensation enables the victim to  restore the results of the damage and losses which befell him. In case of third party liability, the insurance company gives the Insured, when the danger occurs, the necessary compensation in accordance with the insurance contract in order to indemnify him of the amount of money he paid because of his civil liability for the accident. The same procedures apply to insuring people. The insurance company gives the Insured the compensation to which it committed itself according to the insurance contract signed by both of them. 

2. It earns legitimate gain: 

Cooperative Insurance is a legitimate way for earning gain and profit to the Insured, to the insurance company which runs the insurance operations on the basis of an agency for fixed fees, and to the employees of the company. 

As for the Insured, they will earn profits because the insurance company invests 

what is available of the insurance premiums in legitimate ways as a Mudareb. Profits which are earned are divided between the company and the Insured,since they are the proprietary, according to the percentage agreed upon 

beforehand in the contract.

3. Islamic Insurance Companies are considered one aspect of the appropriateness and usefulness of the esteemed Islamic Sharia for all ages. 

Islamic Sharia is able to keep pace with recent events. It has the ability to deal with everything new and to pass legitimate judgment appropriate for it. Consequently, Cooperative Insurance becomes the substitute for Commercial Insurance. Thus, it opens wide horizons for purposeful study and research. In addition, it contributes to the activation of the jurisprudence of business transactions and transfers it from its theoretical form to its practical reality.

4. It contributes to the building and prosperity of the economy and to the 

growth of economic enterprises:

(a) developing and investing the shareholders' and the Insured's funds in legitimate ways; 

(b) recompensing losses by maintaining the things which are insured, guaranteeing the performance of the functions of those things and preventing them from being ineffective or unproductive items. When the insured risk occurs, the insurance company pays the Insured the compensation agreed upon in the contract to enable him to replace the damaged items by other items which can perform the same functions; 

(c) creating many job opportunities, and thus limiting unemployment; 

(d) finding means of respectful living in case of illness and disability; 

(e) maintaining insurance funds and savings in the country where Islamic Insurance Companies are established and investing these funds for the benefit of the citizens.