Quora Answer: What are the Reasons People Do Not Take Out Insurance?

The following is my answer to a Quora question: “What are the reasons people do not take out insurance?” 

Insurance is part of risk management.  It has a role in estate planning, in risk mitigation for specific activities, and in covering unplanned expenses.  People who do not take up insurance do so for three main reasons. 

The first is that they do not understand the role of the different types of insurance coverage, and minimise its importance.  They do not prioritise it, since it is viewed as an expenditure.  If they do take it up, it is the first item to be dropped in the event of a cashflow challenge. 

The second is that they are sceptical about the role of insurance, or shun it for ideological or religious reasons.  Perhaps they believe that it is against religion, such as some Muslims with their quaint notions of what is shari’ah compliant.  Perhaps they had a bad claim experience, and imagine that this is all a scam. 

The third is because insurance is not a viable option for them.  This could be denial of hospitalisation coverage due to pre-existing condition, or denial of general insurance coverage due to a poor claim history, or they could be somewhere insurance is not well regulated, and the industry has a poor reputation.  This is most likely in developing nations, fraud by insurers or their representatives is not uncommon.