Why can’t I invest in insurance companies?

“Why don’t you invest in health insurers like Humana?” That’s a question I’ve heard recently. The short answer is that insurers of all types, whether they’re property, life or medical, do not meet the threshold requirements for investment as outlined by the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI). The long answer takes a little more analysis. Here’s a brief explanation. A word about gharar Simply put, Humana and insurance companies of all sorts deal in gharar, or excessive uncertainty. This term generally refers to game of chance or speculation, or any financial transaction or contract (such as insurance) that includes an element of chance. Gharar in games or entertainment is also called maysir, or gambling, and it is the reason we don’t invest in casinos or the gaming industry at Azzad. A gharar transaction occurs where one party can benefit only by the other’s loss, under conditions of uncertainty. This is sometimes referred to as a “zero-sum game” by economists. Commercial insurance is an example of this, since either the insured pays a premium and receives no counter value, or the insurer pays out much more on a claim than was received by way of premiums. The prohibition