The forms of insurance are so diverse today that they are virtually unlimited, especially with the rapid developments of the modern era, where insurance has expanded into areas where it had no role in the past. Jurisprudence has settled on dividing insurance into two basic types: insurance by form and insurance by subject matter.
Insurance by Form
The classification of insurance by form refers to its classification according to the entity or body that undertakes the insurance process. From this perspective, it is divided into two types: cooperative or mutual insurance, and fixed-premium insurance.
Cooperative or mutual insurance:
In this type of insurance, a group of people, linked by a common interest and exposed to a specific risk, act as both insurer and insured, within the framework of a cooperative association that brings them together to compensate for any damages that may befall one of them as a result of the insured risk. The compensation amount is paid from the total subscriptions that each member is obligated to pay. Cooperative insurance is distinguished by certain characteristics:
Each member of the association simultaneously serves as both insurer and insured. This means that in this type of insurance, there is no insured person who pays a specific premium to the insurer. Rather, the same person plays the role of both insured and insurer, each paying a contribution. Compensation is paid from the total contribution to those affected by the disaster. The contribution paid by the insured is subject to change and is not fixed. The amount paid by the insured depends on the number of accidents that actually occur during the year and their severity. The contribution may be absolute or relative. Change is absolute at the start of cooperative insurance operations, as the value of the contribution paid by each insured is unspecified and depends on the number of accidents that will subsequently befall the insured and their severity. This may lead to an increase in the contribution many times its original value to cover these accidents. However, the change in the subscription value may be relative, as long as a maximum subscription is set, so that the insured's subsequent payment does not exceed this maximum, regardless of the degree of damage.
Solidarity among members: Members of a mutual or cooperative insurance association cooperate to cover risks that befall one or more of them. However, the extent of this solidarity depends on whether the difference in the subscription value is absolute, i.e., not limited to a specific amount, or relative, i.e., set at a maximum beyond which the participating member is not required to pay.
Fixed-Premium Insurance:
In this type of insurance, the insurer, the insurance company, is obligated to pay the insurance amount upon the occurrence of the insured risk, in exchange for fixed premiums paid by the insured. This demonstrates that the insured is not a single person, and that the premium or payment required of the insured is fixed. Furthermore, the insurer is solely liable to the insured. Therefore, this type of insurance is characterized by the following characteristics:
The insurer is separate from the insured. The insurer, the insurance company, acts as an intermediary between the insured and collects premiums from them to be used to compensate for any damages they incur.
The premium paid by the insured is fixed, meaning it is set at a specific amount from the time the contract is concluded. This is achieved by the insured resorting to statistics and technical studies to determine the rates, types, and likelihood of disasters. The premium remains the same throughout the term of the contract. Thus, the insured is aware of what they are obligated to pay from the time the contract is concluded.
There is no solidarity between the insurer and the insured. The insured is obligated to pay the specified premium from the outset, and the insurer alone is obligated to pay the insurance amount when a risk occurs. The insurer relies solely on itself to fulfill its obligations and cannot place any burden in this regard on the insured, regardless of the size of the payments it is obligated to make to others, even if these payments exceed the total premiums. The insurer, i.e., the insurance company, in return monopolizes the profit realized from the reduction in the value of compensation relative to the total premiums. Therefore, some call this type of insurance commercial insurance.
Insurance by Subject
Insurance is divided into several types, based on the subject matter it addresses. It is divided into marine, river, air, and land insurance, social insurance, personal insurance, and damage insurance.
Marine, River, Air, and Land Insurance:
This classification of insurance types is based on the nature of the risks insured against. Accordingly, marine insurance refers to the type of insurance that aims to cover maritime transport risks, whether these include risks that may befall a vessel, such as sinking or fire, or risks that threaten goods, such as damage or sinking. However, marine insurance does not extend to risks that may befall people on board a vessel, as insurance for these people falls under the scope of land insurance. Another form of marine insurance is river insurance, which covers the risks of transport in canal and river waters. According to the prevailing opinion in Islamic jurisprudence, this insurance is subject to the same provisions as marine insurance. Aviation insurance covers only the risks of air transport to which the aircraft or its cargo are exposed. This insurance is likely subject to the provisions of land insurance, with the exception of those regulated by international treaties. Land insurance, on the other hand, covers risks that do not fall under the previous categories.
Private Insurance and Social Insurance:
Private insurance refers to insurance taken out by an individual to protect against the consequences of a specific risk or a potential future accident. The person taking out this insurance seeks to achieve a private, individual interest, namely, obtaining security from an insurance company. In return for this interest, the individual alone bears the insurance premiums. In this type of insurance provided by insurance companies, the latter's goal is to make a profit, and this insurance is based on technical and statistical foundations to achieve its goal. This insurance is distinguished by being voluntary in principle, although there are cases where it is mandatory. Social insurance, on the other hand, is a system based on achieving a public interest, represented by covering the social risks to which members of the working class are exposed and which may prevent them from performing their work, such as illness, disability, old age, and unemployment. This insurance responds to social considerations, essentially based on the idea of solidarity or social mutual support. Therefore, the state contributes, along with employers and workers, to shouldering the burden of this insurance, i.e., its subscriptions. Social insurance is compulsory, not optional for the worker or employer, provided its conditions are met. Participation in this insurance is an obligation stemming from the law, which defines its circumstances, conditions, and effects. No party to the relationship has the right to amend this obligation. Thus, the legal regulation of this insurance differs from that governing private insurance. Private insurance is subject to the rule of the contract, the law of the contracting parties, and the principle of the sovereignty of the will, within the framework of mandatory rules. As for social insurance, the legislator regulates it in all its aspects, whether in terms of terms and conditions or beneficiaries. The state also oversees its regulation and manages its affairs.
Damage insurance:
In this type of insurance, the insured risk is focused on the insured's property, not their person. This insurance aims to compensate the insured for any damage that may befall them as a result of the insured risk. This means that it has a compensatory nature, and compensation may not exceed the amount of damage that actually occurred, provided that it is within the maximum insurance limit agreed upon between the insurer and the insured. In this type of insurance, the insured has the right to be restored to the condition it was in before the insured risk occurred. This insurance may not be a source of enrichment for the insured. This type of insurance is divided into two main categories: property insurance and liability insurance.
Property insurance: This type of insurance aims to compensate the insured for the loss of their assets when the insured risk occurs. In this form, there are only two parties: the insurer and the insured, who is also the beneficiary of the insurance. Property insurance includes a wide range of insurance types, including: home insurance against fire risk, livestock insurance against death risk, property insurance against theft, and crop damage from frost or natural factors. Credit insurance also falls under this category. Although this insurance is closer to banking operations than insurance, it is also considered property insurance. Property insurance also includes investment insurance, whereby the investor insures his capital against non-commercial risks that may befall it. The insured item may be specifically specified at the time of the contract, such as insurance on equipment or goods located in a specific warehouse. In other cases, it may not be specified at the time of the contract, but it may be specified when the disaster occurs.
Liability insurance: This type of insurance aims to protect the insured against third-party claims due to damages that may be incurred by the insured due to a mistake committed by the insured, causing them harm that renders them liable. In this case, the insurance aims to compensate for the damage incurred by the insured's financial liability due to their liability towards third parties. Therefore, the objective of this insurance is not to compensate for the damage suffered by a third party, but rather to redress the damage incurred by the insured as a result of their obligation to pay compensation to the injured party. Liability insurance is essentially compensatory in nature, and therefore a type of damage insurance. However, this description is limited to it if the policy stipulates that the insurance amount is due, as agreed upon between the parties, upon the occurrence of the risk, regardless of the existence or extent of the damage. Liability insurance includes: car accident liability insurance, fire liability insurance, professional liability insurance, and transportation accident liability insurance. Liability insurance involves three parties: the insurer, the insured, and the third party (the injured party). In certain cases, the third party may file a direct claim against the insurer to obtain compensation for the damages incurred, rather than filing a compensation claim directly against the insured. The third party then reclaims the compensation paid by the insurer. However, this does not make the insurance contract a stipulation for the benefit of a third party—the injured party. Rather, its primary purpose remains to compensate the insured for any damages incurred to their financial liability as a result of a third party's recourse. The insured enters into the insurance contract for their own personal benefit, not for the benefit of a third party.
