Third party insurance (1)

Question:
What is your opinion about third party insurance?

I live in Saudi Arabia. There is an option of license insurance by the government for 350 SR (for one year) which covers all third-party loses. There is a conflict of some Islamic scholars and Government officials over this matter but some say that it is OK and safe. Please help me about it with a little detail so that I can convince other people.

Response:
Insurance is fine in its basic functioning. The only problem one can point out in it is the manner in which its funds are dealt with. Most insurance companies invest their extra funds in interest-based securities to generate extra funds. Other than that, there is no problem in an insurance contract. Even in case if interest is earned, it is the company’s policies which, one might argue, is not the concern of an individual insurer. However, to be on the safe side, it is better to avoid dealing with insurance companies which generate the bulk of their revenues from interest. So, find out what the Saudi authorities are doing with their extra funds and decide.

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