Canadian insurer takes new approach to targeting underserved communities
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Its fully transparent, Shariah-compliant insurance offering aims to set a new precedent for inclusivity. Can Ethical Insurance change the game?
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IMAGINE A fully transparent insurance policy in which an insured can see how the premium is generated and where it goes when collected.
Now imagine if the insurance provider upheld fairness in business transactions, supported ethical industries, and channelled surplus funds toward community development projects.
This is the vision CHES Special Risk president and CEO Gary Hirst pursued four years ago when he began conceptualizing Canada’s first specifically ethical insurance provider, Ethical Insurance.
"We were looking at different ways to offer policyholders a more transparent insurance journey," said Hirst. “That comes down to how people's premiums are received and, more importantly, what happens if the underwriting portfolio makes a profit.
CHES Special Risk proudly introduces Ethical Insurance, Canada's pioneering Shariah-compliant commercial insurance, launched in Ontario. This groundbreaking initiative revolutionizes insurance practices, prioritizing ethical values and social responsibility. As the first Shariah-compliant insurance provider in Canada, Ethical Insurance aligns with ethical and socially conscious principles, catering to commercial property liability and construction risks for Ontario-based clients.
The company is committed to delivering specialized products and services tailored to diverse needs, including new immigrants seeking insurance solutions aligned with their ethical and religious principles. With transparency, fairness, and social responsibility at its core, Ethical Insurance ensures compliance with Shariah principles, guided by a dedicated Shariah supervisory board led by Sheikh Zubair Miah and Sheikh Muhammad Shikder from Al Huda Shariah Advisory Services Limited.
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"This isn't just about tapping into a niche market; it's about redefining industry standards. We're setting a precedent for transparency, ethics, and inclusivity in the insurance sector, for those individuals concerned about what happens to their dollar spend"
Gary Hirst,
CHES Special Risk
“In today’s market, especially with social media, individuals are a lot more aware of their responsibilities to the environment. But I think they're also genuinely interested in how their money is spent by third parties.”
This growing consciousness of environmental, social, and governance issues among consumers helped CHES Special Risk determine what should go into an ethical insurance product. The managing general agent then saw a parallel with Islamic teachings and law to guide them.
“During this process, we related the idea of ethical insurance purchasing to the Muslim teachings of Shariah,” Hirst revealed.
Shariah, often referred to as Islamic law, governs various aspects of Muslim daily life, including finance and commerce.
Within the context of insurance, Shariah teachings provide a set of principles that guide Muslims in their interactions with insurance products and services. These teachings emphasize ethical conduct, fairness, and cooperation, and are easily understood and applied by any potential policy purchaser.
“Shariah teachings are very extensive,” said Hirst. “We are focusing particularly on the financial aspect of Shariah, which is quite a pure way of looking at insurance. But its principles resonate very loudly with transparency, which is what we were targeting.”
Central to Ethical Insurance is the separation of funds to avoid mingling premiums with industries deemed unethical by Shariah, such as adult entertainment, alcohol, certain food products, arms, ammunition, chemicals, and pharmaceuticals.
"We deliberately set up a new trust account into which premiums from ethical policy purchases have to be paid," said Hirst.
The meticulous approach extends to policy wording, and the definitions of each of the participating parties, claims handling. and sourcing by retail brokers. Ethical Insurance currently offers Shariah-compliant commercial property, commercial liability, and construction insurance, with homeowners' policies soon to be launched.
"From the way our premiums are received to policy wordings, every aspect of Ethical Insurance has been scrutinized to align with Shariah teachings,” emphasized Hirst.
“Rather than simply collecting premiums, we emphasize that policyholders are investing in the security of their coverage, with premiums meticulously allocated and managed separately to maintain integrity. In the event of a claim, our trained insurance adjusters apply indemnity according to the policy's defined terms."
To ensure the authenticity and compliance of their product, CHES Special Risk established an independent Shariah supervisory board, provided by Sheikh Zubair Miah and Sheikh Muhammad Shikder at Al Huda Shariah Advisory Services Limited, an advisory of Muslim scholars based in the UK, and obtained a signed certificate of compliance.
Ethical Insurance’s remit to the Shariah supervisory board is to oversee its Islamic insurance business and program.
The board of advisors will act independently and advise on Shariah matters, helping ensure the firm stays compliant and providing help and clarification to any participant requiring assistance. The Shariah supervisory board will also assist in disbursing the surplus to benefiting charities.
Ethical Insurance is also engaging with retail brokers to offer robust training in its products. It is appointing brokers through contract in the distribution and explanation of its services and product offering.
“We need retail brokers to adhere to stringent payment guidelines, such as depositing payment for our ethical policy into a separate bank account,” Hirst said.
“So, while we may do lots of other business with these brokers, we can't accept premiums for the ethical policies into our general accounts because we don't want to co-mingle our participants’ money with industries non-compliant with Shariah teaching.”
“We're hoping that the advent of this insurance policy will make a segment of the insurance-buying public, as well as immigrants, feel that their concerns and ethics are being considered – and especially for new Canadians, that they are feeling more welcome and more at home in their new country of residence”
Gary Hirst, CHES Special Risk
Ethical Insurance currently operates only in Ontario and for Ontario-based clients as part of the initial rollout, with expansion to other provinces expected.
Hirst explained that this was because the province has welcomed a significant Muslim population, providing a ripe opportunity for Shariah-compliant insurance policies.
“This is not a product that's been available to participants before. So, as a result, the potential clients we are hoping to see benefit from the offering have been forced to buy a product that, in a way, is against their religious beliefs,” he said.
“We're hoping that the advent of this insurance policy will make a segment of the insurance-buying public, as well as immigrants, feel that their concerns and ethics are being considered – and especially for new Canadians, that they are feeling more welcome and more at home in their new country of residence.”
Hirst also stressed that there is no difference in premium between their regular and ethical businesses.
"We're offering the same products at the same pricing levels, but with added assurance of ethical compliance,” he told Insurance Business. “We're also looking to give benefit back at the end of the financial year through donations to selected charities.”
But while Shariah-compliant insurance products are specifically tailored to meet the needs of Muslim consumers, their principles of fairness, transparency, and ethical conduct have broader appeal for consumers today.
By embracing these principles, the insurance industry can foster consumer trust and confidence, strengthen its social impact, and contribute to a more equitable and sustainable society.
Ethical Insurance plans to expand its offerings nationwide, catering to various compliant industries and clients within the Muslim community and beyond.
"This isn't just about tapping into a niche market; it's about redefining industry standards," said Hirst. "We're setting a precedent for transparency, ethics, and inclusivity in the insurance sector."
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What is a Shariah-compliant insurance policy?
Ensuring continued ethics and Shariah compliance
Ensuring continued ethics and Shariah compliance
Published April 22, 2024
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Copyright © 2024 KM Business Information Canada Ltd
Contact Us
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Best in Insurance
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Risk Management
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People
HOW NON-INTEREST INSURANCE WORKS
Takaful policy holders
Common fund
Common fund
Payout claims
Funds Ethically invested
Profits
Common fund
Common fund
Surplus shared between policy holders and the Takaful Operator depending on the model used
Sharia-compliant versus traditional insurance: What’s the difference?
Premiums
Capital and reserves
Claims
Expenses
Reinsurance
Investment income
Claims
Expenses
Re-Takaful
Contributions
Shareholder fund capital
Policy holder or Takaful fund reserves
Fees and Loans
Investment income
Catering to Canada’s growing Muslim population
Ensuring continued ethics and Shariah compliance
IN Partnership with
Catering to Canada’s growing Muslim population
Catering to Canada’s growing Muslim population