🔖What is Insurtech

Not unlike the rest of the insurance industry, Islamic alternative to insurance suffers from the lack of investments in product development and technology transformation. “Software eats the world” industries are aggressively taking on a software-first approach to re-inventing themselves.

That is what Takadao intends to do in the insurance industry while using disruptive technology such as Blockchain, Smart Contracts and DAO governance.

Blockchain is a distributed ledger network, meaning that the enlargement of the dataset is not possible without the agreement of everyone in the network. In this process, some of the nodes use the computing power of their CPUs/GPus to confirm that the new block of information is consistent with the previous information stored in all previous blocks. By doing so, the new block is added to the existing ones in a way that it becomes impossible to tamper with the whole content of the dataset, referred to as immutability.

Due to these properties, Blockchain technology not only provides a way to secure the content of the data from loss and unilateral retroactive change but also several other advantage as described in the following:

Instead of relying on paper-based agreements, traditional financial institutions are also adopting another disruptive technology called Smart Contracts, which are computer programs that help to facilitate the transfer of money and assets. Smart Contracts are now understood as agreements with automated execution. Parties involved in such contractual relations agree ex-ante on a set of conditional statements that are coded in the smart contract. When these conditions are met, the agreed provisions are executed automatically.

A Decentralized Autonomous Organization is governed by auditable smart contracts that cannot be changed by any one person. This enables a “trustless” entity, one that doesn’t require a centralized authority like national courts or police to enforce. Smart contracts are computer code that don’t have biases or fears and don’t make decisions based on emotions.

Since a ledger is simply a record of transactions, Shariah compliance is a non-issue. The basic principle regarding the use of a new technology is of permissibility until evidence indicates that it is forbidden by Shariah.

Al-Hafiz Ibn Hajar said in Fath Al-Bari that the principle is that things are permissible until the Shariah says otherwise.

While blockchain technology is innocuous, the project and underlying transaction which the ledger records does need to be scrutinized by qualified scholars to determine whether it is Shariah-compliant or not. Scholars are unequivocal that each project should be analyzed against Shariah principles before participation.