Islamic finance accelerates into motor policies
Muslim insurance could prove popular with other drivers too, says Chiara Cavaglieri
Sunday 15 February 2009
First it was Islamic current accounts, then mortgages and investment funds, and now we have a motor insurance product that conforms to Islamic law, or sharia.
This move will be welcomed by many of the two million British Muslims looking to buy insurance cover aligned with their faith. But it could also prove popular for non-Muslims who find the notion of an ethical or co-operative insurance product appealing.
Unlike conventional insurance, where risk is transferred from the policyholder to the insurance company, halal [permissable] insurance, or takaful ("guaranteeing each other"), requires all participants to share risk equally. Instead of premiums, participants pay contributions which, as with ordinary insurance, are calculated on the presumed risk of the individual and how likely they are to claim. These contributions are then pooled in a takaful fund which is invested in strictly halal activities. There is also a Shariah Supervisory Committee, made up of sharia scholars, to oversee all activities and to ensure that the whole process is consistent with Islamic principles.
Interestingly, once the fund has been used to pay for any valid claims, any surplus money is redistributed to participants at the end of the year in the form of discounted premiums, which come in addition to any no-claims bonuses.
"What is unique is the ethical nature of what we do," says Bradley Brandon-Cross, the chief executive of Salaam Halal Insurance. "It's a transparent process and the opportunity to get something back is attractive to customers, both Muslims and non-Muslims alike."
But there is no guarantee that there will be any surplus money to share out. Motor insurance firms have been making underwriting losses in recent years: there was a recorded deficit of £267m in 2007 and £204m in 2006.
At Salaam Halal, if claims outweigh contributions, shareholders advance the money to pay for any excess claims. Shareholders then recover that cash in times of profit. This could mean that even in years in which there are surplus funds, there will be little or no money left to share out among participants after the retrieval of shareholders' contributions.
Sharia prohibits usury – the receiving of interest – as well as the undertaking of haram activities (those that are forbidden to Muslims, such as gambling and dealing in alcohol or arms). This leaves many financial products, including conventional insurance, in opposition to sharia, and so many Muslims have few options when shopping for products that conform to their faith. Standard insurance falls down because it involves the taking of a financial risk that the policyholder will make a loss if a claim does not occur, which to many Muslim scholars constitutes a gamble.
Insurance is just the latest of Islamic financial products to become available in the UK. In comparison with mortgages, the insurance sector has been slow on the uptake. Islamic mortgages have grown from having a 0.3 per cent market share in 2003, to 0.8 per cent in 2009 with a value of £429m, according to the research company Datamonitor.
Salaam Halal's motor insurance has just become available through price- comparison site Moneysupermarket. com and the indications are that it's both popular and competitive. "There has been a lot of interest," says Kaye Pimblett, motor insurance manager at the site. "During its first seven days on Moneysupermarket.com, Salaam Hall returned more than 37,000 quotes. And when they returned a quote, they appeared in the top three positions on over a third of occasions," she adds. Already, the insurer has plans to take its co-operative model of doing business into the home insurance sector.
Lloyds Banking, which has pioneered Islamic finance products in the UK, is not surprised at the popularity of any sharia-compliant launch. "Although as a market, UK Islamic finance is in its infancy, it's still set to become big business," says Emile Abu-Shakra, a spokesman for the bank. "We offer Islamic current and business accounts, mortgages and investment funds."
Mr Abu-Shakra adds: "We piloted these in just five branches in 2005 but that quickly expanded to all 2,000 the following year."
- 1 Snoop Dogg and Jared Leto buy a stake in Reddit as A-list invests $50m
- 2 Prince held a Facebook Q&A and this is the only question he answered
- 3 Car tax disc changes: Two days to go - and they affect you much more than just not displaying a piece of paper
- 4 Now we know whose fault it is if you end up being murdered in Thailand
- 5 35,000 walrus gather ashore on north-west Alaska beach 'for a rest'
Exclusive: 'Putin's Russia has been my biggest regret,' says Nato's outgoing Secretary General
The Osborne Ultimatum: Chancellor’s benefits freeze bombshell will affect ten million households
There’s no excuse for Dave Lee Travis’s behaviour, but we need to keep a sense of proportion
Should gay sex be illegal? 16% of Britons think so
Mark Reckless becomes second Tory MP to defect to Ukip in a month
Benefits 'smart cards' plan revealed by Iain Duncan Smith to stop claimants spending welfare money on alcohol
- < Previous
- Next >
iJobs Money & Business
£18000 - £23000 per annum + Commission: SThree: Real Staffing are currently lo...
NEGOTIABLE: Austen Lloyd: TRUST ACCOUNTANT - KENTIf you are a Chartered Accou...
£18000 - £20000 per annum + OTE £30000: SThree: SThree are a global FTSE 250 b...
Highly Competitive Salary: Austen Lloyd: CITY - Law Costs Draftsperson - NICHE...
Day In a Page
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000
A six-bedroom farmhouse with five acres of land in a former cloth-making village
A secluded seven-bedroom detached house with large private garden, £490,000
A three-bedroom cottage overlooking Sarratt village green with open fires and solid oak floors