Challenges in Implementing Sharia Principles in Mudharabah and Musyarakah Contracts in the Sharia Life Insurance Industry

Abstract

This article examines the challenges of implementing sharia principles in mudharabah and musyarakah contracts within Indonesia’s sharia life insurance industry. The study is grounded in the contemporary regulatory architecture of Indonesian insurance law, including the Otoritas Jasa Keuangan regulation on the organization of insurance and sharia insurance business and the DSN-MUI fatwa on mudharabah musytarakah in sharia insurance, both of which recognize investment-based contracts as legitimate contractual structures in sharia insurance operations. Using a qualitative research design, this article applies a normative-empirical approach through document analysis of regulations, fatwas, and sectoral policy documents to identify doctrinal, institutional, operational, and governance-based constraints. The findings show that the principal challenges arise from contract hybridity, ambiguity in profit-sharing formulation, asymmetry of information between operators and participants, limitations in sharia-compliant investment management, weaknesses in product governance, and tensions between prudential regulation and substantive sharia compliance. The analysis further demonstrates that the implementation gap does not primarily stem from the absence of legal basis, but from the complexity of translating regulatory permission into transparent, fair, and accountable business practices. Strengthening standardization, disclosure, supervisory integration, and sharia governance is therefore essential for enhancing legal certainty and public trust in sharia life insurance products in Indonesia.