Why Have Islamic Insurance Systems Developed Well in Some Countries, but Not in Others?

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All human activities are subject to the risk of loss from unforeseen events. Thus, insurance is highly purchased as it can safeguard one’s financial needs and secure your future plans. One of the products that is on high demand is Islamic insurance. As the Islamic insurance market has been experiencing tremendous growth in the past few years, some questions arose. One of them is “Why have Islamic insurance systems developed well in some countries, but not in others?”

This question was mentioned and discussed in the dissertation of one of the International Relations study program lecturer Muhammad  Sigit Andhi Rahman, PhD. Graduated from Graduate Program in International Studies Old Dominion University in Virginia,  USA, Sigit did research with the title “At the Hands of Fate: the Politics of Islamic Insurance in Indonesia, Malaysia, and Pakistan”.

Compared to Indonesia and Pakistan, Malaysia is home to a relatively large number of Islamic insurance providers, making the country an elite among the three. On the other hand, Indonesia and Pakistan are still in the early stages of development. To explain the development gap between the three, Sigit analyzed the political and social history of the Islamization of insurance systems in Indonesia, Malaysia, and Pakistan since the 1980s.

His findings demonstrated two major factors that contribute towards such a development gap, as he stated, “Firstly, various groups within each country polity made complex bargains that are structured by the country’s fundamental political institutions. Secondly, there is a significant contribution to different societal transformations during the Islamization that ‘produce Islam(s)’ in these countries.”

Sigit’s findings emphasized that contrary to the assumption that the revival of Islamic principles in Muslim economic life only produces Islamically regulated things, it also produces and emplaces Islamic norms, identities, ethics, and practices enacted in their economic life.

“The concept of ‘risk’ in insurance has now developed and is increasingly important. Whether it is BPJS insurance, Islamic insurance, or social gathering (arisan in Indonesian), it is all our manifestation of managing risk. Unfortunately, these products have only been assessed as mere financial products. Through this research, I want to show people that our political interests and perspective on values or ideology or religion can influence the way we manage risk,” Sigit said.