In my article Insurance: Halal or Haram?, I pointed out that insurance was in fact not only permissible in Islam but indeed virtuous when used properly.
I argued that the way an insurance company managed its cash reserves is a separate matter from whether insurance was Halal or Haram just as the way Apple managed its cash reserves is a separate matter from whether an iPhone is Halal or Haram.
I suppose a response to this would be to say: if we’re not responsible for how a company uses our money after we make payments to it, are we allowed to purchase goods or services from a company that is involved in human trafficking? What about one that operates sweatshops and employs minors? In other words, where does one draw the line?
I’ll admit, answering the question of what level of responsibility we bear regarding how our money is used after we’ve spent it is not an easy moral question to answer. This is certainly not a question I can answer for you. In these cases, there is no substitute for employing one’s best judgment and using common sense. Questions you should ask include:
Do I have alternatives?
How necessary is the product I’m buying?
If I’m buying a t-shirt that I know was made by minors who were taken out of school to make them, a rational response would be to say: I’m going to buy a different t-shirt brand even if it costs a couple dollars more because I don’t want to support the exploitation of minors. On the other hand, if there are no alternatives and the product isn’t necessary altogether, for instance, diamonds that I know are being used to finance conflicts in Africa, then I can simply go without that product altogether.
However, what I can say with certainty, is that the question of our moral responsibility regarding how our funds are used after we purchase a product is an entirely separate question from the question I set out to answer in the article which is: whether or not insurance is Halal or Haram.
If the argument is that, because some insurance companies manage their cash reserves by investing in interest-bearing products, insurance is forbidden in Islam, accepting this logic makes almost any payment to any company prohibited in Islam. This seems like a rather wide net to cast which is rather unproductive and would render Islam’s prohibitions on anything, basically meaningless.