By

Datuk Dr. Syed Othman Alhabshi

President & CEO

Universiti Tun Abdul Razak

(UNITAR)

Risks in contemporary society

One of the wealthiest men in the 1970�s in USA was Howard Hughes. A few years before his demise, he suddenly began to be so fearful of everything that may cause harm to him. He was afraid that he might be involved in plane crash and hence he refused to travel by plane. Soon he realized that traveling by rail or car could also cripple him or kill him if he got involved in some serious accident. Such fears eventually caused him to remain in his own residence for fear that he might even be knocked down by some vehicle or motorcyclist while strolling or walking. After some time remaining in his own beautiful residence, he suddenly realized that he might get into contact with some germs and still may die out of it. So he not only confined himself in his own room in the big house, but eventually ordered to seal the room so that not even the germs could come in. He refused to allow anybody to enter his room. He did not have his regular hair cut or even cut his finger nails that he kept very long unruly hair and long finger nails. I wonder if he had his bath, for he might even just fall down and break his hip bone or something. Of course he finally died.

Of course that story is very extreme indeed.

This shown one thing though, that man faces all kinds of risks in life. On a personal basis, one may get involved with some form of accident or other and get hurt. The accident could take place anywhere at all. It could even be in one�s bedroom, e.g. falling from the bed and breaking one�s wrist, for instance. One may do some gardening and may cut a few fingers off when mowing the grass. Whether we move or stay put, we are actually exposing ourselves to accidents.

Another source of risks that are normally insured is our health. We may contract all kinds of diseases and require out patient treatment, hospitalization, operations, etc. Nowadays, there are people who would take good care of their legs for they require them for some form of sports, like football, or hands for basketball players, etc. Some even want to keep their teeth nice and beautiful.

Apart form bodily harm, we may also face the risk of loosing our wealth or property. This can include our vehicles, our houses, our jewelry, cash, etc. They can be stolen or burnt or even be damaged by some mishaps.

There are also those risks associated with some business transactions. These commercial risks may take various forms too. For instance, we may not be able to enter into a transaction without presenting some form of guarantee that we will perform the task to its completion. A contract that is to be undertaken may require us to present a bond or performance guarantee. Such bonds or performance guarantee may be in the form of some insurance. In other words, we may not have to present the total value of the bonds, but we may actually purchase an insurance policy by paying a much lower premium that the value of the bonds. In this case, the insurance company that produces the certificate guaranteeing our performance is the one that takes the risk of our non-performance.

Can you imagine the kind of risks involved when a full-load plane takes off from the runway. It is not only the plane itself that might crash and completely destroyed, it is also the pilots, the crew and the passengers who are risking their lives and the luggage that may be destroyed. The same goes with a huge ship that carries thousands of tons of cargoes and hundreds of passengers. The story of Titanic is similar.

How about the Formula One drivers who took the wheel to race every fortnight? Obviously they are risking their lives every time they took the wheel. We know that, this year alone, at least one marshal has died, being knocked by one of the wheels of the F1 cars. Of course the spectators are also at risk.

I do not think that we want to be like Howard Hughes. That is just extreme. He was so risk averse that he could neither move nor keep still. We would like to take some risk, as long as we know we can manage it. Often times, we calculate whether we could actually absorb the risk or not. If we find that the risk is too big for us, then we should either not take it at all, or else we should try to minimize it.

In modern society, almost every type of risk could actually be mitigated. As long as there is an insurance company that is prepared to take the risk for us, we may cover ourselves or mitigate our risks. It is up to us to make the choice of which risks to mitigate in our daily lives.

Risk management

Whilst we can choose the kinds of risks that we would like to mitigate so that we could feel more confident and comfortable to carry on our lives, we should also decide on how and who to mitigate them for us.

Conventional insurance could actually handle almost all types of risks that we could imagine. What is more important for us is whether the services they provide would actually meet our needs or not. Of course they do satisfy our needs to mitigate our risks, in the sense that they are capable of creating insurance products that would generally cover the kinds of risks we take. However, is that the only need that we have? Are we not concerned that they are quite alien to the original concept of insurance that was started by the Muslims about one thousand years ago?

The Muslims were sea faring merchants who took their products overseas from the Middle East to Europe in the north, to South East Asia in the for east via the African continent. Every time they set sail, they would face the risks of being robbed by the pirates or drowned by the huge waves, etc. After some time, they realized that they could actually mitigate such risks if they got together and pool some fund as an insurance for them to compensate anyone who faced any mishap in their long journey. With that pool of fund, they could compensate the unfortunate merchant who could then build up his business again. Otherwise, the unfortunate merchant may loose all his wealth and could not afford to rebuild his business. This idea came from the teaching of the Qu�ran, wherein we are supposed to help one another in goodness and God consciousness and do not help one another in bad deeds and enmity.

When the Europeans, especially the Spanish and Italians learnt of this system from the Muslim merchants with whom they traded, they started the same system and called it marine insurance. Of course they modified it by investing the money while they were away so that the pool of fund would generate some interest and hence increase the compensation they could pay or reduce the amount of fund to be pooled.

From that idea, the whole insurance industry of the west was born. However, it involves us with riba that is strongly prohibited by Islam. Furthermore the whole philosophy and concept were different from the original, which was trying to help one another.

Takaful which is based on the principle of helping one another collects premiums to cover risks. But the premium is also invested in Shariah based instruments. The profits are eventually being distributed between the takaful company and the participants. In this case, it is very transparent and fair to the participants.

What is also more important is the fact that conventional insurance is materialistic in the sense that every risk that we take is compensated in terms of money. We cannot get back exactly what we have lost. There is clearly less humanistic element in the whole process. However, takaful, by its philosophy, stems from the intention of helping one another, which is very noble indeed. We are compensated in monetary or materialistic terms but at the same time, if we understand the underlying principle, it is also a form of worship that will be repaid in other forms in the hereafter.

This act of participating in takaful is therefore making us a continuous worshipper as demanded by Allah (swt). The Qu�ran declares that, �I do not create Jinn and man, expect to worship me�. I believe that we need to be wary of every action that we undertake in this undertake in this world for each and every action has an impact on us in the next world. We are accountable for every bit of our action. Takaful itself is one that frees us from indulging in prohibited activities (riba, etc.), compensates monetarily losses that we incur out of the risks that we have to face and rewards us in other than monetary from in the hereafter. The best reward is still those that we obtain in the hereafter. They are lasting pure and satisfying.

Takaful companies have created various types of products that could be used to mitigate various forms of risks that we face in our daily lives. In fact, almost all types of risks that are being covered by the conventional insurance, can also be formulated in ways allowed by Shariah.

Wallahu �alam.