It Turns Out It Exists! Understanding Sharia Cargo Insurance and How It Differs from Conventional Insurance

Have you ever wondered if cargo insurance coverage exists that not only safeguards your business but also aligns with Islamic ethical principles? Amidst the rapid growth of the halal economy, this question is increasingly relevant. Many businesses, both large and small, are now seeking solutions that are not only efficient but also ethical.

The good news is, the answer is“Yes, it turns out there is!”and the solution is known as sharia cargo insurance.

This product offers a solution for businesses seeking to protect their cargo from the risk of damage, loss, or delay, while maintaining fund management principles in accordance with Islamic law. Interestingly, the development of sharia-compliant products in the insurance sector is currently accelerating, as awareness among Muslims in Indonesia and globally grows.

This article will thoroughly examine the fundamental differences between Sharia freight insurance with conventional insurance, revealing why this product offers more than just financial protection, as well as highlighting the role insurance broker in helping you choose the right product.

Sharia Principles in Freight Insurance

The basis of Islamic goods transportation insurance is the contract Tabarru’ And The plague.

• Tabarru’ contract means donation or grant. This means that each participant contributes a certain amount of funds into a collective fund which functions as“help fund”This fund is then used to assist other participants who experience disasters, such as lost or damaged cargo.
• The Shadow Principle or mutual assistance creates a sense of togetherness, where each participant is part of a community that supports each other, not just a client.

In contrast to conventional insurance which is generally based on a sale and purchase agreement, in sharia each participant is positioned more as community members who share a common interest. This fosters a sense of solidarity and adds value, as business focuses not only on profit but also on blessings.

In addition, sharia principles apply universally to all modes of transportation, whether land, sea, or air. Specifically for sea transportation, this product is known as marine cargo insurance syariah, which provides protection against risks in international and domestic trade routes.

Interestingly, this system is also supervised by the Sharia Supervisory Board (DPS) so that every policy, investment, and operational practice is truly in accordance with Islamic rules.

4 Fundamental Differences with Conventional Insurance

To understand why Islamic cargo insurance is an attractive option, it is important to look at the differences in four main aspects: 

1. Agreement (Contract)

• Sharia: Using the tabarru’ contract, the donated funds are in the form of a gift and are purely for mutual assistance. Participants are not buying risk but are instead participating in a community of solidarity.
• Conventional: Using a buy-sell agreement, the policyholder purchases the risk from the insurance company. The resulting relationship is more transactional in nature.

2. Fund Management

• Sharia: Tabarru’ funds are managed separately from the company’s operational funds. This separation ensures high transparency, as participant funds are not mixed with company funds.
• Conventional: All premiums paid by policyholders belong to the company and are managed as a single entity. Transparency regarding the use of funds is usually more limited.

3. Investment

• Sharia: Funds may only be invested in halal instruments, free from any elements riba (flower), gharar (ambiguity), and maysir (gambling). Examples of permitted investments include sukuk, sharia-compliant stocks, or halal real sector projects.
• Conventional: Companies are free to invest in any instrument, including those containing elements prohibited in Islam, such as interest-bearing bonds or companies with non-halal practices.

4. Surplus Underwriting

• Sharia: If at the end of the period there is a surplus (excess funds) due to small claims, this surplus can be returned to participants according to their contribution portion or distributed to social activities.
• Conventional: All underwriting profits and surpluses belong to the company. Participants receive no share of these excess funds.

Konsep Risk Sharing vs Risk Transfer

Apart from the four differences above, there is one other important aspect that differentiates Islamic cargo insurance from conventional insurance, namely: way of looking at risk.

Risk Sharing – Sharia

In the sharia system, the principles used are risk sharing. All participants contribute to a collective fund, known as tabarru’. If any participant experiences losses, their claims are paid from this collective fund.

Participants share risks, not transfer them to other parties. This is in line with the values of the plague (mutual assistance), which emphasizes togetherness, justice, and solidarity.

For example, exporter A and exporter B both contribute to a tabarru’ fund. When exporter A experiences a cargo loss, the claim is paid from that fund. Thus, the risk is shared by the community, not just the insurance company.

Risk Transfer (Risk Transfer) – Conventional

In contrast, conventional systems use the concept risk transfer This means that the policyholder transfers the risk to the insurance company by paying a premium.

In this case, the relationship created is transactional:  the participant buys protection, and the company bears the full risk according to the contents of the policy.

For example, an exporter who purchases a conventional cargo policy pays a premium to an insurance company. If a loss occurs, the company is solely responsible, not the other participants.

Difference in Values ​​Generated

• Sharia (Risk Sharing): Cultivate a sense of togetherness and blessings because all parties support each other.
• Conventional (Risk Transfer): More focused on the business aspect, where the company takes risks as part of the sales contract.

This difference is what makes Islamic cargo insurance increasingly relevant for those who want to prioritize the values ​​of solidarity and sustainability in business.

Why is Sharia Cargo Insurance Increasingly Popular?

The growth of Islamic insurance, including cargo insurance products, is inextricably linked to the global trend of the halal economy. According to the State of the Global Islamic Economy report, the market value of halal products and services continues to increase annually, with Indonesia becoming a key player.

Some of the main reasons why Islamic cargo insurance is increasingly being sought after: 

1. Sharia Compliance: Muslim business owners feel more at ease because the entire process is free from prohibited practices.
2. High Transparency: The fund separation system ensures that the use of funds is clear and open.
3. Sense of Solidarity: There is a sense of togetherness that fosters trust among participants.
4. Regulatory Support: The Indonesian government is encouraging the growth of the Islamic financial industry, including insurance.
5. Export Market Demand: Many of Indonesia’s export destinations, such as the Middle East, prefer sharia-based products and services.

Case Study:  Coffee Export Cargo

For example, a coffee exporting company in Sumatra shipped containers containing thousands of kilograms of coffee to Türkiye. During the sea voyage, some of the cargo was damaged by high humidity.

If using conventional insurance, the claim will be processed based on the applicable policy, but the surplus premium will not be returned.

On the other hand, if the company uses sharia cargo insurance, claims are still disbursed, and if there’s a surplus of tabarru’ funds at the end of the period, a portion can be returned to the exporter or channeled to social activities. As a result, exporters receive both guaranteed protection and additional blessings.

The Role of an L&G Insurance Broker:  A Guide to Finding the Right Choice

Choosing between conventional and sharia cargo insurance can be confusing, especially with the sheer number of products on the market. This is where the role of L&G Insurance Broker becomes very crucial.

L&G is not an insurance provider, but rather expert partners who help you navigate the insurance market. Their roles include: 

• Risk Analysis: Helping companies understand the real risks in transporting goods.
• Product Comparison: Providing a choice of sharia and conventional products from various insurance companies.
• Premium Negotiation: Ensuring you get competitive premiums with maximum benefits.
• Claim Assistance: Assist clients in the claims process so that it runs quickly and fairly.

With the help of an L&G Insurance Broker, you will gain a thorough understanding of each product’s differences, compare offers from various companies, and ensure the choice of Islamic cargo insurance that best suits your business needs.

This professional guidance is crucial to ensuring your decision is not only financially sound but also ethical. In an increasingly complex business world, having an experienced broker like L&G can be the difference between simply buying a policy at a bargain price and truly obtaining valuable protection.

Conclusion

Sharia-compliant cargo insurance is not just a protection product, but a financial solution that aligns business protection with Islamic principles. Through the tabarru’ contract, transparent fund management, halal investments, underwriting surplus sharing, and a comprehensive financial management mechanism, Sharia-compliant cargo insurance offers a comprehensive financial solution risk sharing, this product offers added value that conventional insurance does not have.

With increasing awareness among Muslims and regulatory support, the presence of Islamic cargo insurance will become increasingly relevant amidst global trade flows.

However, choosing the best product cannot be done carelessly. Get in touch with L&G Insurance Broker right now at 08118507773 for a free consultation and make sure your cargo protection is in the right hands.

Source: 

• https: //ligaasuransi.com/asuransi-syariah-di-2025-inovasi-kolaborasi-dan-digitalisasi/ 
• https: //www.tamkeen-ins.ps/en/article/30/Marine-Cargo–Insurance