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Should Muslims be actuaries? How misunderstandings about Islam spread.

A career enquiry from a schoolboy illustrates how many Muslims make assumptions about what Islam permits them to do. A related danger is unquestioningly following advice from Muslims whose own knowledge of Islam and of the modern world may be limited.

Summary

17 January 2016

My website's "Contact me" page makes it easy for strangers to contact me. As a result, from time to time I receive requests for advice.

Quite often these requests illustrate how Muslims can pick up misconceptions Islam. A good example is the email correspondence below, which I have edited slightly for anonymity and clarity.

Incoming email received via my website

"I am writing to you concerning an enquiry that I have about the rulings on actuarial science. I am currently 18 years old in upper sixth and will soon be applying for university.

My intentions are to apply for an actuarial science course. However, to my understanding the practices that actuaries do are not 100% permissible due to the fact that they must deal with interest and insurance.

To my understanding insurance, loans and working in a conventional bank is prohibited so I found that there was Islamic banking and I was wondering whether or not actuaries have any place in an Islamic bank? Is it permissible to use actuarial techniques to assess future risks and possibilities?

One day I hope to become an actuary working for an Islamic bank insha’Allah if it is permissible of course and also if Islamic banks hire actuaries."

My reply sent by email

"I have a policy of not giving religious advice to other people.

Partly this is because I have no formal religious qualifications. More fundamentally, my policy comes from my strong belief that on the Day of Judgement each of us will be individually accountable to God for what we have done and for what we have not done.

Accordingly, I believe that it is the responsibility of every Muslim to study Islam and to reach their own conclusions on all religious questions. That does not preclude ascertaining the views of others who may have spent many years studying Islam, but the final decision on what to do has to be that of the individual Muslim.

This is the same as the law in the UK regarding medical treatment. Doctors can advise and make recommendations but an adult of sound mind is free to reject any medical treatment.

The questions you raise are very important.

In my opinion much of what passes as religious advice is unreliable. For example, I have a Muslim friend who bitterly regrets abandoning a promising army career in his younger days because he allowed older Muslims to convince him that serving in the British army was religiously impermissible; a religious view that he now considers to be incorrect.

Accordingly, I recommend that you do some more studying regarding how Islam bears upon the questions that you have raised. I have some pointers for you.

I am not sure how familiar you are with Islamic finance but there is an extensive amount of material on my website listed on the Islamic finance page. I recommend in particular the following items:

How conventional insurance and takaful differ numerically

A simple introduction to Islamic mortgages

In my opinion, unless the risks that a takaful company is pooling are absolutely homogeneous, it needs actuarial expertise to ensure that customers representing one type of risk are not being subsidised or disadvantaged by customers representing a different type of risk.

Accordingly, takaful companies operating in the Middle East or Malaysia do employ the services of actuaries. I have done a little bit of searching for you, and copied two links below:

http://www.malaysiantakaful.com.my/Career/MTA-Members/Corporate-Management/COO.aspx

http://www.takafuloutsource.com/about-us/

In passing, you may be interested to learn that the Muslim partner who succeeded me as UK Head of Islamic Finance at PricewaterhouseCoopers LLP is a qualified actuary who works for both conventional insurance clients in the UK and the Middle East as well as for takaful operators.

The question of whether interest is permissible in Islam is one on which there are divergent views. I recommend reading the article below:

Are Islamic banks Islamic enough?

In Iran and Sudan all banking is required to be Islamic by law. In all other Muslim majority countries one finds conventional banks and Islamic banks operating side-by-side with individual Muslims making their own religious decisions regarding how to bank.

I often come across Muslims expressing the view that Islam rejects the concept of “the time value of money.” Regardless of whether you share that view, when you look at how Islamic banks operate, it is quite clear that they do charge for the time value of money. That is fundamental to the mark up in a murabaha transaction.

I also come across Muslims contending that the Islamic finance industry needs its own benchmarks so that it can price Islamic financial transactions independently of the market interest rates that apply in conventional finance. In my opinion it is unrealistic to believe that the price of money can be different in Islamic finance and conventional finance while there is scope for arbitrage between the two.

I wish you well in your future endeavours and once again reiterate my advice to do your own studying and then reach your own religious opinions. While I do not know the background of any people who may have advised you, I caution you against accepting advice from people who may not have an adequate understanding of the subject. It is not enough to spend years in an Islamic seminary, one also needs to understand the economics and the meaning of risk and risk sharing."

Letter from Amin - 13 January 2016

I used part of the above correspondence for my fifth monthly column in the magazine Islamic Finance News which was published on 13 January 2016. However it was highly abridged due to the strict word limit applicable.

"My website intentionally makes me easy to contact and I regularly receive emails from younger Muslims seeking advice. The highly abridged essence of one received last month was “I am currently 18 years old in upper sixth and will soon be applying for university. My intentions are to apply for an actuarial science course however to my understanding the practices that actuaries do are not 100% permissible due to the fact that they must deal with interest and insurance.”

Many young people do not have access to knowledgeable advice, and are often misled by friends and family who themselves make assumptions without proper knowledge. For example, I have a Muslim friend who bitterly regrets abandoning a promising army career in his younger days because he allowed older Muslims to convince him that serving in the British army was religiously impermissible; a religious view that he now considers to be incorrect. In my opinion much of what passes as religious advice is unreliable.

In my reply, I explained that do not give religious advice to other people because on the Day of Judgement each of us will be individually accountable to God for what we have done and for what we have not done. Accordingly, it is the responsibility of every Muslim to study Islam and to reach their own conclusions on all religious questions. That does not preclude ascertaining the views of others who may have spent many years studying Islam, but the final decision on what to do has to be that of the individual Muslim.

The above approach is similar to the law in the UK (and many other countries) regarding medical treatment. Sensible people who are not experts in medicine are well advised to consult qualified medical practitioners before deciding what treatments to undertake. However the final decision is that of the patient, provided they are adults and of sound mind, i.e. not insane in the eyes of the law. While doctors can advise and make recommendations, the patient remains free to reject any proposed medical treatment.

Accordingly, I encouraged my enquirer to do his own religious research before deciding whether Islam allowed him to train as an actuary. However I then gave him some helpful pointers.

While the religious scholars who give Islamic finance opinions consider conventional insurance impermissible, they regard takaful as acceptable. I explained that unless the risks that a takaful company is pooling are absolutely homogeneous, it needs actuarial expertise to ensure that customers representing one type of risk are not being subsidised or disadvantaged by customers representing a different type of risk. As illustration I gave the young person a link to a page on the Malaysian Takaful Association advertising actuarial positions!"

 

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