Takaful and Public Auto Insurance in the Canadian Context

Many studies have been done on Takaful, also known as Islamic insurance within the Muslim community. Takaful is seen as the permitted alternative to the conventional insurance system which is deemed forbidden in Islamic law by many scholars due to containing elements of interest (riba), uncertainty (gharar) and gambling (maysir). But little is known about the other Islamic alternative to conventional insurance, which relies on a government or public approach and is presently being applied in Canada. Another option to the dilemma Muslims have regarding conventional insurance should be welcomed in the Muslim community, especially if shown to be better than the current alternative(s). Takaful is a non-profit fund created by a group of people to compensate for losses of anyone in the group, which happen due to certain events. From this definition, Takaful can be referred to as mutual insurance. Also, Takaful is based on contributions or donations, not premiums. Any surplus in the fund can be given back to participants. However, profit can still be generated from investments in the fund and the Takaful operator can charge fees to manage the fund. The government, whether local or national, can similarly fulfill the functions of Takaful. Conceptual research relying on secondary data will be used in this article to discuss specifically the practice of public auto insurance in Canada and whether public auto insurance is better than private auto insurance. The hope is that after this research, public insurance will not only be considered a viable alternative to private insurance but also applied in Muslim majority states to cover all kinds of insurance that individuals need, whether it be health, auto, life, long-term disability, travel, and other types.