Why Muslims should not use conventional insurance?
Conventional insurance involve riba, gharar, and maysir. Therefore, Muslims should avoid using conventional insurance.
Riba in conventional insurance happens directly and indirectly. The indirect involvement of riba happens if the amount of premium paid by the customer is not equal to the sum covered that he received. Whereas, the indirect riba happens on the investment of the customer’s fund in interest-based businesses.
Gharar happens when the customer’s liability and the right are uncertain. He doesn’t know how much exactly he should pay and receive due to the uncertainty of the insured event.
If the accident or the insured event occurs, the insurance will cover the lost amount. But if the insured event does not happen, the insurance company will keep the premium as profit. It is speculation (maysir) whereby the company is betting on the profit and loss.