Is Managing Medical Insurance Claims Permissible Employment?

Answered by Shaykh Muhammad Carr

Question

I work in a medical clinic and have been assigned to establish contracts with health insurance companies and manage insurance claims. Does this type of work fall under assisting in Riba, or is it considered doubtful (shubha) in Islam?

Answer

In the Name of Allah, the Most Merciful and Compassionate.

Thank you for reaching out and seeking clarification on this important matter. I understand your concerns, and it’s commendable that you seek to ensure that your vocation aligns with Islamic principles.

If the foundational structure of the insurance adheres to Shari‘a principles, it would be permissible for you to establish these contracts. Many healthcare systems are based on a mutual cooperative model. In such an environment, the default would be that of permissibility.

If the insurance is commercial, establishing such contracts would be impermissible, as they are considered contractually risky (gharar) and involve interest (riba). Commercial insurance is treated as a commutative transaction, in which no allowances are made for contractual uncertainty or for the potential disparity between the premiums paid and the claims received.

According to the Hanafi school of thought, managing insurance claims is permissible. Click here for the principles underlying this ruling and a clear explanation.

Cooperative Insurance

Insurance, defined as implementing measures to protect against potential future risks or hazards, is firmly grounded in Sharia law. Just as risk is an inherent aspect of daily life, safeguarding ourselves against such risks is equally natural and normal.

The crucial aspect lies in the method used to address these risks. Contemporary scholars generally agree that cooperative insurance, based on the Takaful model, is permissible.

Cooperative insurance occurs when a group of individuals mutually assist each other by contributing to a fund to compensate for the loss or damage caused by a hazard that could affect any one of them. [Karan, Medical Insurance]

A group of persons enters into a partnership; each individual contributes a specified amount; whoever is afflicted by any calamity is assisted from this collective fund; thus, each individual is considered an insurer and insured. [Ibid]

The nature and relationship between the contracting parties are the most critical aspects of cooperative insurance. It most notably distinguishes it from commercial insurance. In a cooperative format, as stated previously, the legal roles of the customer and owner are united into a single form: “members.”

Commercial Insurance

If the insurance is commercial, it would be impermissible to enter into these contracts, as they are considered contractually risky (gharar) and entail interest.

Allah Most High says,

“Cooperate with one another in goodness and righteousness, and do not cooperate in sin and transgression.” [Quran,5:2]

The Prophet (Allah bless him and give him peace) said,

“Whoever guides to good will have a reward like that of the one who does it.”

The opposite also holds true.

Gray Areas

Shubha, often translated as a “gray area,” is inherently relative. The Prophet (Allah bless him and grant him peace) said, “Many people do not know it.” With proper knowledge, one can navigate this space, engaging in what is permissible while avoiding what is impermissible.

At the same time, the risk of falling into impermissible matters is real. Therefore, the Prophet, may Allah bless him and grant him peace, concludes this teaching by saying, ‘He who avoids the gray matters safeguards his religion and his honor’.

I pray this is of benefit and that Allah guides us all.
[Shaykh] Muhammad Carr
Checked and Approved by Shaykh Faraz Rabbani

Shaykh Muhammad Carr has dedicated his life to studying and transmitting our beautiful deen. His studies have taken him around the globe, where he has benefited from many luminaries. Under the guidance of his teachers – Shaykh Taha Karan, Shaykh Yaseen Abbas, Shaykh Muadh Ali, and many others – Shaykh Muhammad has grown to appreciate the beauty and benefits of diverse scholarship. He completed his memorization of the Qur’an at Dar al-Ulum Zakariyyah in September 1997 and received an Alimiyya Degree in 2006 from DUAI (Darul Ulum al-Arabiyyah al-Islamiyyah). He is also affiliated with Masjid Auwal in Bo Kaap, Cape Town (the oldest mosque in South Africa), where he serves as a co-imam, and Dar Al-Safa, where he has taught since 2018. As a teacher, he imparts the wisdom of our heritage and tradition by opening the door to students. As an imam, he has the unique opportunity to serve his community in daily life.

In addition to his roles as a teacher and imam, Shaykh Muhammad Carr has contributed significantly to the administrative and advisory aspects of Islamic institutions. Since 2023, he has served as the Administrative Director at The Imam Kurani Institute, contributing to the institution’s growth and development. He continues to pursue traditional Islamic Sciences, possessing a keen interest in Islamic Contract Law and Finance. Shaykh Muhammad has been a Shari‘a Board Member for Islamic Asset Management & Insurance Companies since 2001, aligning financial practices with Islamic principles.