Why Many Pakistanis do not Prefer Auto Insurance?

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Insurance has always been notorious for influencing people to take a side, in its favor or against it. Those who are in favour of the insurance have always enumerated the benefits it represents along with the mental satisfaction. But those who are against it either have had a bad experience in the past or have heard horror stories of insurance companies not paying-off what they owe to their customers. And naturally, auto insurance also befalls in this pit of disconcerted trials, which has been tried and tested frequently. So being a curious onlooker, I decided to search for this timeworn question myself. Interestingly, I found out that around 21,000 vehicles are being stolen yearly, and the total figures surrounding this auto theft turn-up an astounding 5 billion rupees worth of property loss. It is a long shot in cases of car theft of recovering your vehicle. And even if the vehicle is recovered, it will be in dismal condition to be of any use.

According to the recently published PakWheels.com Auto-Industry Survey, only 25% out of the 11,000+ people who participated in this survey admitted to getting their vehicles insured. There is also the 1965’s Pakistan Motor Vehicles Act, which dictates that every vehicle on the road must be insured.

But here in Pakistan things have a tendency to turn out different than expected, or I should say, the lack of proper monitoring and implementation influences people to take a negative route. Although all vehicle owners in the country are required by law, to get their cars insured, the vast majority of motorists decide to stay away from insurance companies. Most of the insured vehicles on the roads are mainly attributed towards the financed/leased cars, due to the bank’s policies on ensuring the safety of their investment.


But, then again, the gap between two sides (75-25) is quite big. The fact still remains that this behavior endangers both, the investment and lives of motorists. Surely, while writing this post, I decided to look up the procedures for getting a car insured and the process looked fairly easy to me.

While one can argue about all the good things about an insurance, the fact remains that sometimes reality is different than what is perceived. Clearly, the conception about insurance companies not paying off or rebutting their customers on some hidden contractual clauses must hold some iota of truth in it.
I believe the solution to this problem is simple. The government not only needs to strictly implement the 1965’s Pakistan Motor Vehicles Act but more importantly they need to carefully monitor and regulate the policies of insurance companies.

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  1. Guest says

    1. Insurance companies do not insure vehicles which are more than 5 years old. The traffic policemen are clever and only ask for certificate of insurance from the older vehicles, thus a constant source of bribe-receiving is kept alive.

    2. I cannot find any clause related to insurance in the Motor Vehicles Ordinance. The only reference is that if a commercial vehicle is not insured “as required by the law”, its permit can be suspended (Clause 34, Chapter III). And even then, only third party insurance is compulsory, comprehensive insurance is not. The irony of it, even the people I have seen having comprehensive insurance, I have never come across anybody filing a claim for third party damages, while they have been claiming first party losses under the same.

    3. Just like conventional banking, many people believe conventional insurance also has elements of interest (riba) and thus avoid. Recently (past 20 years), islamic takaful companies have cropped up, making the insurance service available to a greater and diverse audience.

    4. Then there is another school of thought which says insurance of property is haraam similar to the way life insurance is haraam.

    5. And then there is another school of thought which believes insurance is blasphemy because it is like challenging the destiny or the will of God.

    6. The article already discusses about the insurance companies having bad rep for cheating their clients and usurping their payments. Recently the government has made an insurance mohtasib (ombudsman) but how many people want to bother?

    7. Another problem which is a deep-rooted issue of our society: For many types of insurance claims, an FIR is needed. Getting the FIR registered at the police station is a major pain. You have to give them some money (PS: that money is not bribe – bribe is the money paid for doing something wrong. But in Pakistan in many cases even the right thing cannot be done without under the table payment). This money is an extra expense.

    8. Further problems with police and FIR: once the policemen know you, they will be usually asking money from you, on the pretext of diesel for their police mobile or something else. once they see your door, they will usually come to “meet” you, causing you an overall nuisance. As you may know, any house in the neighbourhood where policemen frequent is going to become a social outcast, they will have difficulty marrying off their daughters and what-not. The social cost of lodging an FIR is very high and results in suffering of decades. Hence people would altogether avoid anything to do with the police, and that includes insurance too since to avail the insurance claim, FIR comes into play.

  2. Zuhaib Khan says

    Abdul Hannan Mian, are you trying to pass on the pakwheels survey with different headings as space filler ?! The Guest here did a better job highlighting the major reasons BTW.

  3. Hassaan Iftikhar says

    Very nice,you nailed it.

  4. munib says

    I was expecting some technical info here but the article proved to be like a running commentary or random views.

  5. Talal says

    Suppose I own a Mehran, I would prefer not to get it insured and spend money from my pocket as maintaining it or getting it fixed after accident is dirt cheap. Insurance can rest in pieces.

  6. kingMAK says

    I used to have same thoughts but recently started thinking like, in case of theft or khudanakhwasta total loss by accident, insurance will matter. What do you say?

  7. Talal says

    If i am running rent a car business where drivers are carrying my cars, i will prefer insurance. Can’t trust drivers with cars.

    But for car like Mehran, not going to waste tens of thousands of rupees every year on insurance.

  8. Guest again says

    Total loss Mehran can be restored in less than 1oo,ooo!


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