Enhancing Mutual Assistance: An Analysis of Sharia Insurance Fund Separation in Comparison to Conventional Insurance

Abstract

Separation of funds in sharia insurance adheres to the main principle of mutual assistance (ta'awun), which means that each participant must have the intention to help each other. The application of the concept of separation of sharia insurance funds emphasizes the position of tabarru funds which may only be used for the needs of policyholders (ta'awun), while funds originating from the shareholder component (ujrah) can be used for the needs of insurance companies. This study aims to determine the concept of Islamic insurance in the separation of funds which is an advantage compared to conventional insurance. A qualitative method was chosen in this research, which used sharia insurance companies in Indonesia as the research object. Research findings state that the separation of sharia insurance funds is divided into tabaru (mutual assistance) funds and ujrah funds which is in accordance with the concept of fund theory. Efforts to invest higher levels have been made by the company, but the low investment returns mean that the profit sharing between participants and the company is lower, while investment losses will still be borne by the participants. Besides that, low claims on sharia insurance mean that companies do not need to use their reserve funds to cover the high level of tabarru fund claims.