Insurance Under Nigerian Statutes: the Islamic Law Alternative

Insurance Under Nigerian Statutes: the Islamic Law Alternative

CHAPTER ONE

Objectives of the Research

From what we have stated so far and statement of problem above, the main aim of this research is to make a comparative study of motor vehicle insurance scheme under Nigerian Statutes and Islamic law with a view to achieving the following objectives:

To evaluate the general principle of motor vehicle
To evaluate 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.

CHAPTER TWO

MOTOR VEHICLE INSURANCE SCHEME UNDER NIGERIAN STATUTES

Introduction

The primary purpose of having insurance scheme in place is to ensure security against any future risks or loss. In other words, insurance policy alleviates or reduces the burden of responsibility of the insured upon the occurrence of risks¹. This purpose is encompassing and cut across all the sphere of our lives. It is therefore interesting to state here that just as it is important to have insurance policy (which is compulsory in some specific areas)² under Nigerian law, so also it is relevant to know what contract of insurance is, as well as its constituents elements, in order to observe them and give life to the intention of parties to the contract of insurance. Failure to observe or meet the relevant elements of the contract of insurance may vitiate the entire contract and render any benefit therein unenforceable³. Since motor vehicle insurance scheme is a category of contract of insurance, those elements required for the contract of insurance are also applicable here and should therefore be considered. Thus, it is of high interest and for ease of understanding to consider the basic fundamentals and basic elements of contract of insurance under Nigerian statutes before considering specifically motor vehicle insurance and its types.

2 The summary of various compulsory insurance policies are: ( a) Statutory Group li fe Insurance as required by section 9( 3) of the Pension Reform Act, Cap. P 11 Laws of the Federation of Nigeria, 2014. (b) Employee’ s insurance for Compensation as requi red by section 33 of the Employee’ s Compensation Act 2010, (c) Builder’ s Liability Insurance as required under section 64 of Insurance Act, Cap. I 17, Laws of the Federation 2004. (d) Occupier’ s Liability Insurance as required under Section 65 of Insurance Act. ( e) Moto r Vehicles ( Third Party) insurance as required by section 68 of Insurance Act, and section 3 ( 1) of Motor Vehicle ( Third Party) Insurance Act, Cap. M22, Laws of Federation 2004( the subject matter of this work). ( f) Health Care Professional Indemnity Insura nce as required by section 45 of the National Health Insurance Act, Cap. N 42 Laws of the Federation of Nigeria, 2004.

General Principles and Basic Fundamentals of Contract of Insurance

As stated earlier, contract of insurance is generally governed by principles of common law of contract⁴. However, due to their peculiar and special nature contract of insurance (of whatever type) are, in addition to the general principles of contract, governable by special or fundamental principles, which shall be discussed later in this chapter.

The reference to general principles of insurance contract here means those principles of contract generally, that are also applicable to the contract of insurance.⁵ Thus, the following general principles of contract are also applicable to contract of insurance: Offer and Acceptance, Consideration, Capacity of parties to enter in to contact and intention to create legal relations.⁶

Offer and Acceptance

Offer has been generally described and defined as “definite undertaking or promise made by one party with the intention that it shall become binding on the party making it as soon as it is accepted by the party to whom it is addressed”.⁷ Acceptance on the other hand is defined as “a final and unqualified expression of assent to the terms of the offer”⁸. It is therefore important that the acceptance must correspond with the terms and condition of offer.

CHAPTER THREE

MOTOR VEHICLE INSURANCE: ISLAMIC LAW ALTERNATIVE

Introduction

Islam and indeed Islamic law consist of rules or set of rules and procedures that guide and govern all affairs of human being in all ramifications.¹ Thus, Islamic law is all encompassing as it regulates the creed (aqeedah), acts of worships (Ibadah) as well as human dealings, trade and commercial transactions. The set of rules that regulate commercial transactions is generally termed as „Fiqhul Mu‟aamalah‟ under Islamic law. There are numerous quranic injunctions that have emphasized the need to engage in commercial activities in order to earn lawful living.²

Having said that, it is important to note that Islamic law did not only command participation in economic social activities in a community but also spelt out the rules and guiding principles as well as essential elements to be observed for valid transaction(s) under Shari‟ah (Islamic Law). It is essential to point out here that these principles were spelt out or derived primarily from Quran and Sunnah as well as other sources of Islamic Law particularly Ijma, Qiyas and Urf (Custom of particular community and profession that offended no provision or well established principles of Shari‟ah).

Even though the conventional insurance generally and motor vehicle insurance particularly is not valid under Islamic law, there is an alternative framework which complies with Islamic law that has been developed. This alternative scheme, in English language, can be termed “Islamic Insurance”. But, in Islamic law parlance, it is technically known as Takaful.⁴ As a form of commercial transaction, the principles upon which Motor Vehicle Takaful are based and derived from can also be traceable to all or some of the sources of Islamic law earlier noted, particularly as based on and derived from the principles of ijtihad.

Consequently, as a follow up to preceding discussions in Chapter Two, this Chapter gives a clear clarification on the Islamic law perspective on insurance in general and motor vehicle insurance in particular with specific efforts aimed at disclosing how the Islamic alternative to the motor vehicle insurance operates.

CHAPTER FOUR

JUXTAPOSITION OF MOTOR VEHICLE INSURANCE SCHEME AND MOTOR

TAKAAFUL AS ISLAMIC LAW ALTERNATIVE

Introduction

In the immediate preceding two (2) chapters (chapters 2 and 3 supra), we have discussed insurance scheme on motor vehicle under Nigerian Statutes and Takaaful as Islamic Alternatives respectively. Various legislations, Legal principles and fundamental features that formed the basis of motor Vehicle insurance Scheme under the two systems had been also highlighted.

In this chapter, we would juxtapose the operation of the motor vehicles insurance scheme under the two systems with a view to pointing out some differences.

Contrasting Takaaful (as Islamic Alternative to Insurance) Operation with Conventional Motor Vehicle insurance Scheme under Nigeria Statutes

As earlier stated in chapter three (3), there is no objection from Islamic Points of view to the Conceptual Aspect of motor insurance Scheme (which is asset protection). However, due to the involvement of certain unlawful elements (such usury, gambling, uncertainty and cheating), in the operation of the scheme, Islamic Law experts and jurist have formulated some models to be adopted in operating the scheme that would make it to be shariah compliant and achieve the purpose of protecting the property-vehicle.

Therefore we will juxtapose the two systems in order to identify differences between the operations of the scheme. Takaaful (as Islamic Alternative to Insurance) differed from insurance in connection with motor vehicle insurance in the following areas and issues:

Insurance on motor vehicle under Nigeria Statutes is Commercial (with exception of co-operative insurance)⁸⁸ while Takaful is essentially based on principle of tabarru‟ (donation), mutual assistance and doctrine of helping one another (ta‟aawun), but the aspect of commercial is developed to invest the funds in the pool in order not to tide down the
Common law insurance is one codified in the statutes while takaful is developed from Principles of Islamic Commercial law through the exercise of doctrine of Ijtihad.

CHAPTER FIVE SUMMARY AND CONCLUSION

Summary

It is a statutory requirement that every motor vehicle user/owner must have at least third (3^rd) party insurance schemes in connection with the vehicle. Consequently, the insurance companies have a lot of role to play in rendering services to the intending insured. However, the mode of operation of the insurance companies involve some forbidden elements (under the Islamic law such as involvement of riba, gambling, cheating and upon this, scholars have declared the conventional insurance as unlawful.⁹⁶

Be that as it may, to enable the adherent of shariah rules and principles to abide by the principles and at the same times comply with the statutory requirement of motor vehicle insurance, this work has highlighted the principles of laws governing motor vehicles insurance under the Nigerian Statutes and Islamic alternative (to motor insurance), juxtaposed their mode of operations. It also provides highlights of some provisions of new Takaaful Insurance Guideline 2013.⁹⁷

Chapter one focuses on the general introduction encompassing statement of research problem, objectives of the research, justification of the research, scope of the research, research methodology and literature review.

Findings

From the analysis made in this work, it is right to conclude that there are vast different features particularly in the modus operandi of conventional motor insurance Scheme and Motor Takaaful (Islamic alternative to insurance), though the two systems are put in place to protect the properties (i.e. motor vehicle specifically in this work) of the participants. Consequently, the operation of the two systems differed and that made it governable and regulated by different guideline, in addition to general statutory provisions.

After proper consideration of the Nigerian Statutes on Motor vehicle Insurance, its Islamic Law Alternative products as well as Takaful Guideline released by NAICOM, the following findings were made:

Most of Insurance Certificates/papers being brandished by vehicle owners in Nigeria are fake. Thus, the main objective of such cover is being defeated in the event of occurrence of risk.
Huge amount of funds is required for the registration as Takaaful– insurance operators and as such serve as hindrance in getting more Takaaful-Insurance operators registered. The amount may not be so big for conventional insurance operator because the governing principle is mainly for business and making profit. This is not so in case of Takaaful which is primarily based on mutual assistance amongst the participants. This may account for the fact that there are just very few operators licensed⁹⁸ so far to operate as takaaful operators under the Guidelines.⁹⁹
Co-operative Model of Takaaful which could have been widely acceptable and serve as practical platform for non-Commercial Takaaful operators, was disregarded by the Guideline.
Inadequacy of Non-Interest Financial Institutions that offer Islamic financing to create market and enabling environment for Takaaful-insurance operator to invest the accumulated funds (pool).Lack of public awareness on the nature and essential constituent of conventional insurance contract generally and Islamic Alternative in

Recommendations

Flowing from the above findings, the following recommendations are proposed to improve on the Insurance Market generally and operation of Takaaful in Nigeria and create market for it:

NAICOM should create more public awareness on the need for genuine motor vehicle insurance policy/cover and specifically expose those insurance companies who allowed their certificates to be used as fake
The Federal and State Governments should create incentives including but not limited to tax, registration fees and requirements for intending Takaful- Insurance operators( particularly) for society and association ( which is not for purposely for busines s) in order to assist the industry to
Co- operative societies should ut ilize provision of Section 1( a) of the Insurance Act and establish co – operative Takaaful particularly in the area of Motor All what is required is the registration as an association and compliance with conditions stated in the section. The section provided thus:

This Act applies to all insurance businesses and insurers, other than insurance business carried on or by insurers of the following description-( a) a fr iendly society that is an association of persons established with no share for the purposes of aiding it s members or their dependants where such association does not employ any person whose main occupation-( i) is t he canvassing o f other persons to become members o f the association;( ii) is the collecting of contributions or subscriptions towards the funds of the association from it s members;

This could take the form of mutual insurance associations which were the earliest forms of insurers¹⁰⁰. Mutual Insurance Association is a kind of co-operative insurance organization and it is operated solely for the benefit of its members. Any profit left over after the losses and expenses have been paid is distributed amongst the members¹⁰¹

There is need for more Financial Instit ution t hat offer Islamic Fin ance to serve as vehicle to invest the surplus funds ( pool) of the Takaaful
Ulamau ( Islamic Scholars and Jurists) should write more books with local content on the Takaaful and further make intensive awareness to the general public on the subject, particularly on motor vehicle which is common and mandatory to all motor vehicle users.

REFERENCES

Abdulazeez, U., (1418.A.H.), Arribahwal-mu‟aamalatulmasrofiyyah fi nazarish- Shari‟atilIslamiyyah,Daaru „aazimah Publishers and Distributors, Saudi Arabia, 8^th edition,
Abu-Zahran, M., (1357 H.), Al-Mulkiyyahwanazariyyat al aqd, Cairo,
Achike, O.,(1985), Commercial Law in Nigeria, Fourth Dimension Publishing Co. Ltd.
Agomo, C.K., (2013), Modern Nigerian Law of Insurance (2^nd Edition) Concept Publication Ltd. Aigbokhavbo, V., Law of Banking and Insurance II, Course Book (Course Code-Law 432 (2010) for School of law, National Open University of Nigeria
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Al-Husary, A., (1408/1986), Assiyaasatul-Iqtisodiyyah, wan-nazmul-Maaliyyah Fil-Fiqhil- Islaamiyy, Daarul-Kitaabil-„Arobiy, 1^st Edition,
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