Is Car Insurance the same as a mortgage based on usury?

I recently took a class with Shaykh Akram Nadwi (SAN), where the talk turned to Islamic positions on conventional mortgages, and Sh. Akram argues that he now agrees with the famous fatwa of Sh. Qaradawi about mortgages, namely that one conventional mortgage is allowed for a household if long-term renting is not a viable option.

In this blog, I do not want to discuss what exactly constitutes a situation where renting long term is not feasible. I've covered it before here. What I want to discuss in this blog is an interesting line of argument adopted by the SAN that made me think. The arguments are as follows:

Let's say X is in a position where renting long term is not really feasible and now he needs to buy a house.

An Islamic mortgage is simply a modified version of a conventional mortgage.

To buy a house, X had to take out a mortgage.

Therefore, X can take 1 conventional mortgage because it is a necessity - just as car insurance is allowed because it is a necessity.

I would like to focus on the analogy described in point 4.

The SAN points out inconsistencies in the opinions of those who legalize car insurance (and damage insurance) because it is the law in force and necessary for driving while considering a conventional mortgage haram although in some cases it is also necessary to obtain it.

The important thing

This is quite an important point because there are a number of views on these issues and these arguments are an important factor in determining which camp you belong to. Are You:

People who say that both conventional mortgage and car insurance are allowed out of necessity (some Muslim scholars like Sh Akram, Sh. Suhaib Hasan).

People who say that conventional mortgages are haram and car insurance is halal out of necessity (mostly Muslim clerics like AlQalam Shariah Panel and Sh. Wahba Zuhayli).

People who say that neither conventional mortgages nor car insurance are haram (I do not know anyone).

People are saying that conventional mortgages are halal and car insurance is haram (I don't know anyone).

So who is right between Group One and Group Two?

The argument for allowing car insurance is that people need cars to get around in the UK - because we can't be expected to use public transport and taxis all the time. Therefore, since we need to buy insurance because of the law, we are allowed to buy car insurance in Islamic law.

SAN and others argue that no one is forcing us to buy car insurance (we can walk, use public transportation, etc.), so it is not an absolute necessity, and likewise we should not buy a house - we can rent - so it is not an absolute necessity. The problem is, Is this a difficult enough issue that we can justify legalizing it out of general necessity? Group Two argued yes to car insurance and no to mortgages. SAN and others argue yes to both.

Is the analogy strong? Let's test it.

Group Two can argue that there is a discrepancy here because the rented property is exactly the same as the property you would get with a mortgage, so a person does not have great difficulties if he continues to rent. However, public transport/taxi is materially different from having your own car so there are real difficulties in the case of having to rely on public transport / taxi all the time rather than your own car. The two things are not the same.

I feel this is a good argument, especially in cases outside urban centers such as London. However, when it comes to London, due to the widespread presence of black cabs, Uber, and underground stations, as well as the regular hassle that comes with owning a car (parking, traffic jams, etc), the argument is a little weaker due to the calculation of the difficulty between owning your own car and using public transport/taxi shifts. However, even in places like London, people end up using cars-and with good reason: they are comfortable. A woman who travels to her mother's house at night will feel much safer in her own car than in a taxi. The two options remain materially different.

The second argument the group of two could make is that every mode of transport in the UK should have a legally valid level of insurance - be it public transport or taxis. Therefore, one cannot avoid supporting insurance indirectly, so it is better to get car insurance yourself and move on with life. However, when it comes to homes, it is not true that every existing home in the UK will have a mortgage. It is possible that the house you rent has a mortgage, but that is not always true. Therefore, renting is not necessarily linked to a conventional mortgage whereas any type of Public Transport/Taxi/your own car is linked to insurance. So this is another difference between mortgage and car insurance cases, and why mortgages are said to be haram by Group 2 and halal insurance.

However, this is not a very compelling argument for me because in Islamic law, in general, what happens between the owners of houses, taxis, buses, subways - is not your business. You transact with them the same way you shop at Tesco, Lidl and Next. No one can suddenly say that it is haram to shop there because they are doing un-Islamic things. Your transactions with them are completely lawful in both cases - renting property or payment of transport services. So in my opinion, this is not a strong difference between car insurance and a mortgage.

Conclusion

Group One put forward a substantial argument for allowing both conventional mortgages and auto insurance out of necessity (in some cases) because they are analogous, however, for the reasons discussed above, I feel that their argument fails because there are significant differences between the two. Therefore, the position of Group Two, for me, is the stronger one.

Of course, it is important to remember that Group One is pushed towards allowing conventional mortgages out of necessity because they consider Islamic mortgages to be the same or worse than conventional mortgages. For them, there is no real "Islamic" alternative to a mortgage other than renting - and it is unacceptable. However, for many scholars of Group Two, they are happy to say that conventional mortgages are haram because there is a viable alternative to just renting: Islamic mortgages. And that discussion is something we've discussed before at the IFG here, here, and here.

And of course there are other schools of thought out there as well: those who think that insurance is basically fine, not out of necessity, but in principle. However, we'll leave that discussion for another day!

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