Why is there a low number of insured cars in the Philippines?

In many parts of the world, auto insurance is considered a necessary expense for car owners of all walks of life. From the working class to the middle class to the rich, a large percentage of their cars are typically covered by insurance. 

For example, in the US, there were about 263.6 million registered vehicles in 2015. This figure comes from Statista, a consumer data platform that tracks global statistics. The company also estimated the number of insured passenger vehicles in 2015 at 202.68 million. That means that in that year, about 77% of registered passenger vehicles had auto insurance.

In the Philippines, the number of insured cars seems to be much lower. We're here to speculate on why this is the case and what we can do to bring this number up in the coming years.

Let's get right to the meatiest answer. A lack of buying power is a significant reason why most car owners don't have insurance. According to the Philippine Statistics Authority (PSA), in 2015, the average household income was P267,000. The average annual family expenditure was P215,000, meaning that the typical Filipino had P52,000 in savings that year.

While average family income has risen since 2015, there's still a relative lack of purchasing power in the Philippines compared to our more prosperous neighbors. With people having few savings, it makes sense why they would pay little attention to having their cars insured. This culture could change as the country continues to develop, but there would have to be considerable changes before we see big progress.

Driving around many roads in the Philippines, you'll likely see a staggering number of older vehicles still alive and kicking. 10, 20, and even 30-year old cars continue to use our roads, and it could be contributing to the low number of insured cars in the country.

Why is this? Well, drivers of older cars may not think they need insurance at all. They could be questioning why they need to get insurance for an aging vehicle that could soon kick the bucket. Solving this is related to the above point. When people start to have more buying power, they will buy newer vehicles that they're more likely to insure. 

For a substantial expense like insurance, most people would have to do at least some amount of research before they pull the trigger. Many Filipinos are simply uninterested in learning about the benefits of auto insurance. Some people may also not have access to credible information or affordable insurance solutions. 

The industry has to do better with reaching out to those uninsured by providing these people with practical knowledge and more attractive insurance programs. If auto insurance companies can extend their appeal to the average Filipino car owner, things might change quickly. 

However, there needs to be a marked cultural shift before we see a meaningful uptick in the numbers. It involves prioritizing educating the public to make smarter personal investment decisions. That includes encouraging people to protect themselves and their cars with auto insurance.