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CHAPTER ONE

1.0                                                        INTRODUCTION

1.1                                           BACKGROUND OF THE STUDY

Every human is prone to face with one or more hazards presently or in the future which is believed to be form part of life, and these hazards may cause him pecuniary loss. This misfortune is uncertain as to time or period it will occur and this among others include: fire outbreak, accident, or even death. it could be seen that all those are beyond human control as their occurrence cannot be controlled by the individual.

It may therefore be correct to state here that, since the purpose of insurance is to cover, cater for or alleviate the effect of unforeseen negative circumstance or risks that affect the property, the institution of insurance could therefore be seen to be in existence from and as old as human existence itself. However, the mode and ways of its formation may not be the same[1]. This is because the primitive insurance contract is in form of mutual insurance and co-operation, whereby the community as a whole will pull the resources together to cater for the loss of individual members whose lives and properties are affected by risks[2] (i.e damages, destruction or loss).

Insurance scheme is put in place to fall back on in the event of risk or calamity occurrence. Nigerian Statutes require that every motor vehicle owner must possess at least third party insurance policy. However, the conventional insurance contradicts certain elements of Islamic law which make it unlawful and unacceptable. Thus, majority of Muslims (believers) and other adherents have refused to adopt the conventional insurance and subsequently, called for alternative shariah compliant products.

It may therefore be correct to state here that, since the purpose of insurance is to cover, cater for or alleviate the effect of unforeseen negative circumstance or risks that affect the property, the institution of insurance could therefore be seen to be in existence from and as old as human existence itself. However, the mode and ways of its formation may not be the same[3]. This is because the primitive insurance contract is in form of mutual insurance and co-operation, whereby the community as a whole will pull the resources together to cater for the loss of individual members whose lives and properties are affected by risks[4] (i.e damages, destruction or loss).

It is very interesting to state here that the Motor vehicle insurance scheme involved some elements that are prohibited and as such majority of scholars has issued fataawa[5] (Islamic rulings) to the effect that all forms of conventional insurance are Haraam (illegal). The major reasons for declaring same illegal is that it is a form of gambling, involved usury (Riba) and that they are contract that are rooted in Garar (uncertainty)[6].

Consequently, this research work discusses essentials elements, formation and operation of insurance scheme with specific emphasis on motor vehicle insurance scheme under Nigerian statutes and Islamic law alternative, differences and thereafter considers the relevant provisions in new Takaful Guideline, identifies challenges therein.

Furthermore, considering the major objective of insurance (protection of property and elevation/amelioration of hardship), the modern scholars have through doctrine/principle of Ijtihad fashioned out alternative scheme termed “atta‟meenul Islamiyy or Attakaaful (as commonly called). The Scholars thereafter applied some principle of Islamic law of Commercial and transactions to develop some products that can be used in the industry to render services that are shariah compliant and at the same achieve the same goal for which conventional insurance is targeted (i.e protection of property and elevation/amelioration of hardship). This study shall discuss the comparative analysis of the concept of insurance under Nigerian statues and the Islamic law.

1.2    Statement of Research Problem

The major constituent elements of contract of insurance under Nigerian Statutes are prompt payment premium as at when due, uncertain nature of the risk and presence of insurable interest of the insured (in the property insured).[7] Some basic elements and features of insurance contract, such as payment of premium and uncertain nature of the events/risks (among others) formed the basis or reasons for the modern Islamic scholars to declare the commercial (under Nigerian statues) contract of insurance illegal.

Conversely, the law mandated every Car user in Nigeria to insure his/her vehicle (at least) against third party[8]. The Act went further, in order to sanction the compliance of the above provision, to criminalize the act of failure to have insurance policy in respect of user’s vehicle and punishment for the failure was also prescribed.[9]

The implication of the mandatory provision of the Act is that notwithstanding the position of Islamic law on conventional insurance, every car user/owner must possess it. The question is how will these set of citizens be saved, in view of the Right to religion[10] as enshrined in the constitution (which is sacrosanct and cannot be curtailed on this aspect)? How would they cope in this circumstance with a view to practicing their religion which includes full compliance with Islamic dictates?   This question is begging for answer. It is a factual problematic situation that is looking for solution or way out. It therefore remains constitutional or legal issue.

It is ore imperative to look outside the conventional insurance scheme in order to develop products that would satisfy and accommodate the interest of the adherent of shar’iah as provided in the alternative products. Furthermore, the concept of insurance is novel as same was not institutionalized during the life time of Prophet Mohammed (S.A.W) and the four guided caliphs. However, the modern scholars have through ijtihad (analogical deduction) and application of Islamic principles arrived at ruling on conventional insurance[11].

1.3          Aims and Objectives of the Research

The main aim of this research is to make a comparative study of insurance scheme (such as motor vehicle) under Nigerian Statutes and Islamic law with a view to achieving the following objectives:

• To assess the general principle of motor vehicle
• To appraise the guiding principle of insurance/contract of insurance of vehicle under Islamic
• To show the relationship between vehicle insurance under insurance Act and Co- operative insurance under Islamic Law (with specific reference to motor vehicle).
• To present the Islamic Alternative product (Takafu/Ta’ameen) to conventional Insurance (limited to vehicle insurance) to adherent of Shariah rules without violating the provision of Motor vehicle

1.4    Significance of the study

It has been observed that most muslims and adherent of Shari‟ah Legal System have refused to adopt conventional Insurance Scheme due to involvement of prohibited elements such as deceit, uncertainty and Riba (usury). However, unknown to majority, Islamic law has alternative and shariah compliant products which is regarded as takaaful  or atta‟meenul islaamy, devoid of all the prohibited elements and serve the same purpose.

This work would therefore provide the basis (Ijtihad) for the alternatives products and mode of operations of the product. This work is therefore would be of assistance to interested stakeholders in the sector and serve as treatise to be built on.

1.5         Scope and limitation of the Research

 

It should be stated from onset that this work would be limited to comparing the conventional insurance (under Motor Vehicle insurance) and its Islamic law alternative. Therefore, the work will thoroughly consider the relevant provisions of Insurance Act, 2003 and Motor Vehicle (Third Party Insurance) Act Cap M22 Laws of Federation of Nigeria, 2004, being the statutory Laws governing the aspect, in Nigeria.   These are Federal legislations since Insurance is under exclusive jurisdiction of the National Assembly²⁷. Reference will also be made to provisions National insurance Commission (NAICOM) Act and the regulation and Guidelines issued by NAICOM in accordance with its the statutory power in regulating and in connection with the Insurance industry.

Conversely, this work also intend to consider Islamic alternative to conventional insurance generally with specific emphasis on motor vehicle insurance, some basic principles of Islamic Law would be referred to.   This is because, the area is novel field and same was not institutionalized during the Prophet’s life and his companions. However, the Scholars (particularly the modern ones) have utilized the doctrine of ijtihad to formalized, institutionalized and structured products that are shariah complaint and therefore provided the Islamic Alternative to conventional insurance, particularly in the mode of operation.

1.6    Research Methodology

This work shall invokes the use of doctrinal research methodology. This is comprised of primary sources such as Constitution, Statutes and judicial authorities as well as secondary sources such as articles and journal and publications. In the same vein, the work also made reference to primary sources of Islamic law (such as Qur‟an and Sunnah) and secondary sources such as Ijama‟, qiyas ijama and the principle of ijtihad (analogical deduction) through which the modern scholars adopted in arriving at ruling on conventional insurance[12].

• Research questions

1. What is the general principle of motor vehicle insurance?
2. Is there any relationship between vehicle insurance under insurance Act and Co- operative insurance under Islamic Law?

• What is the Islamic Alternative product to conventional Insurance (limited to vehicle insurance) to adherent of Shariah rules without violating the provision of Motor vehicle

[1] Suratul- Maaidah: Quran 5 verses 33 and  38.   In  for  instance, Khan,  M. M. and Al- Hilali, M. T., Interpretation of the Meaning of the Noble Quran  in the  English Language , Darussalam Publishers and Distributors, Riyadh, Saudi Arabia, see also Anwarullah, The  Criminal  law  of Islam , ( A. S.  Noordeen),  2 nd Edition,  2002/ 1423, pp. 174 – 195.

[2] Yerokun, O ., Insurance law in Nigeria , Emmanuel C entre, Lagos, 1992, p. 1

[3] Yerokun, O., Insurance Law  in  Nigeria,  Emmanuel Centre Lagos,  1992,  p. g. 2. See also Omo- eboh, O., The Law of Insurance Contract in Nigeria, West African Book Publishers Limited, 2012, P. g. 79, for similar observation and conclusion.

[4] See sections 3, 4 and 5 of the  Insurance  Act,  Cap. I 17,  Laws  of Federation  of Nigeria, 2004

[5] This is Islamic jurisprudential terminology used for “ verdict or ruling” issued by a prominent scholar,  who  is  qualified  and  often  referred  to  as  “ mufti”. Such scholar must be knowledgeable in Qur’ an and i ts exegeses, Hadtihs and Islamic jurisprudence in order for him to make i jtihad ( Analogical Deduction). For the qualifications and more detail on fataawa and  mufti:  see  Salahu  As – shary,  U., Adabul- Fatwa, Maktabatul- Khaanajy- Cairo, 1413 A. H/ 1992, 1 st Edition, P. g 35 – 55.

[6] http:/ www.islamqa.info/ en/ ref/ islamqa/ 130761 accessed on 20/ 12/ 2017, http://www.islamicawakening.com/viewarticle , accessed on 20/ 12/ 2017. These Scholars include ; Shaikh Ibn Uthaimeen, Shaikh  Solih  Al – Fawzan.  For  their  views and   reasons   for   declaring  conventional   insurance    on    car    i llegal,    see http:// www/ islamqa/ info/ ref/ islamqa/ 102969.

 

[7] Okany, M. C., ( 1992), Nigerian Commercial Law, African – Fep Publishers Limited, Onitsha- Anambra, 1 st Edition, p.  624.

 

[8] Section 5 of the Motor Vehicle ( Third party) Insurance Act, Cap. M 22, Laws of the Federation Of Nigeria, 2004.

[9] Section 3( 2), ibid.

[10] 38 of the Constitution of Federal  Re public  of Nigeria   1999  ( as amended)

[11] Muslehuddin, M., Insurance and Islamic Law, Adam Publishers and Distributors, Delhi- India, 2 nd Edition, 1994, P. p. 109 – 125

[12] Muslehuddin, M., Insurance and Islamic Law, Adam Publishers and Distributors, Delhi- India, 2 nd Edition, 1994, P. p. 109 – 125.