YOGYAKARTA Insurance offers various benefits for customers. One of them is preventing individual losses due to unexpected events, such as accidents, fires, and falling ill which force a person to receive intensive care at the hospital.
In Indonesia, there are two types of insurance that are commonly known to the public, namely sharia and conventional insurance. So, what are the differences in sharia and conventional insurance?
According to the fatwa of the National Syarian Council of the Indonesian Ulema Council Number 21/DSN-MUI/X/2001 concerning General Guidelines for Sharia Insurance, what is meant by sharia insurance is an effort to help each other and share between a number of people or parties through investments in customer assets that provide a return pattern to deal with certain risks using the contract according to sharia.
Sharia insurance companies as operators manage asset funds or new tabs from customers to help each other between them.
In practice, the assets contributed by sharia insurance participants are used for four things, namely ujrah, insurance compensation (klaim risk), paying reinsurance, and underwriting surplus.
While conventional insurance is an insurance type that uses the principle of buying and selling risks or risk transfers. This means that premiums paid by customers are used to divert financial risks to insurance companies.
For more details, consider the following differences in sharia and non-sarial insurance.
Quoted by VOI from the official Manulife website, the fundamental difference between sharia and conventional insurance lies in the concept of its management.
In sharia insurance, the concept of management is sharing risk. Meanwhile, conventional insurance uses the principle of buying and selling risks or risk transfers.
The concept of risk transfer in insurance programs is protection in the form of a transfer of economic risk to death or the life of someone who is held accountable to an insurance company as a risk person.
Meanwhile, the concept of sharing risk is to help through asset investments that provide a return pattern to deal with certain risks using a contract that is in accordance with sharia represented by customers to Islamic insurance companies in exchange.
In more detail, here are the differences in sharia and conventional insurance that you need to know:
The agreement/contract/contract on sharia insurance is a grant 'type tabbarru contract' as a form of help-helping or taking risks between customers.
In conventional insurance, coverage agreements are carried out by insurance companies to customers as accountable.
Sharia insurance applies co-fund ownership (collective). Thus, if there are customers who experience a disaster, then other participants will help provide assistance through tabbarru funds.
In conventional insurance, this condition is not perpetrative, because insurance companies manage and determine customer protection funds originating from premium payments per month.
Sharia insurance shares an underwriting surplus (a difference of more than the total contribution of customers to the tabarru' funds after deducting compensation payments) to customers in accordance with existing regulations and previously agreed product features.
In conventional insurance, you do not know the underwriting surplus. This means that the underwriting profit will belong to insurance companies.
Sharia insurance companies are required to have a Sharia Supervisory Board whose job is to supervise the fulfillment of sharia principles in the business activities of sharia institutions.
On the other hand, sharia insurance does not require a sharia supervisory board for not using sharia principles. However, all insurance companies are official and registered to move based on regulations from the Financial Services Authority (OJK).
Sharia insurance policies can be held and registered for one family. That way, each family member can benefit from the policy.
In conventional insurance, the policy can only be held by one person.
That's the difference between sharia and conventional insurance that you should know. Sharia and conventional insurance both have benefits for the wider community, because they avoid various risks of loss.
The English, Chinese, Japanese, Arabic, and French versions are automatically generated by the AI. So there may still be inaccuracies in translating, please always see Indonesian as our main language. (system supported by DigitalSiber.id)
