CRITICAL EVALUATION OF FUNDAMENTAL THEORETICAL CONCEPT OF ISLAMIC INSURANCE “TAKAFUL”

Islamic financial system was justified through theories. Theories are, considered as justification for the existence and acceptance of all academic and intellectual exercise. Islamic insurance theory is not exemption from this general belief. A number of Islamic scholars, market players, and academics have contributed to the development of theories for the Islamic insurance, which resulted in the conclusion that insurance and the Arab system of aqilah (mutual prudence) have something in common. In short, the proponents concluded that there is no difference between the two systems of insurance and aqilah. This study evaluated and compared through dedicated analysis method the fundamental concepts of both insurance and aqilah. The results showed that insurance and aqilah has nothing in common. They are, based on different concepts, which renders previous theories a wrong-conceptualisation/erroneous theory. We suggest the relatedness of kafalah (trusteeship) and insurance should be, taken into consideration in an effort to eradicate the technical problems facing the Islamic insurance.