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AIG and Aviva offer motorists two-year insurance policies
INSTEAD of paying annually for car insurance, vehicle owners these days have a more unusual option - taking out a two-year policy, that is, one with double the period of coverage generally extended to motorists.
This novel product is available from AIG, Singapore's No.3 motor insurer, as well as online insurer Aviva.
AIG's package promises "24 months/24-hours coverage", with the main benefits being a savings on premiums and protection against claims loading.
With AIG's example of an annual S$1,000 premium, the cost of a two-year policy is S$1,800, or a 10 per cent discount.
As for claims loading, an AIG policyholder involved in an accident will incur no change in premium for two years; a higher excess kicks in only on the next claim.
The dual-year policy also offers new-for-old vehicle replacement, with cover for total loss of a vehicle in an accident if the car is less than 24 months old, and complimentary key replacement cover of S$800 for key replacement, break-in protection and lock-out reimbursement.
Also included is a free no-claims discount or NCD protector with automatic fee inclusion from the 13th to 24th month.
AIG says it started offering two-year motor insurance plans for new car owners for Toyota, Lexus and Suzuki two months ago.
Its spokeswoman said that the two-year plan brings "a host of benefits" such as greater convenience: "The customer only needs to renew his/her road tax after the first year of the policy, without the need to renew his/her motor insurance until two years later."
She added: "There is premium pricing certainty, as not only is the premium price locked in for two years, the customer also does not have to worry about any premium increase due to claims submitted during the two-year tenure."
Aviva says about 10 per cent of its customers go for its dual-year car insurance plan.
Head of general insurance Pan Jing Long said Aviva was the first to introduce such plans to bring its customers cost savings.
"The dual-year plan is a win-win proposition for drivers and Aviva. For Aviva, it means a lower customer acquisition cost, which translates into cost savings that can be passed on to our customers," said Mr Pan.
When contacted, the General Insurance Association of Singapore (GIA) said its policy is not to comment on members' products.
But an executive of a competing insurer, who asked not to be named, described a two-year policy as a "hedge on premiums'".
The insurance executive said: "By paying for two years in a row, a motorist will hedge on premiums if they are rising. But if premiums are falling, then the insurer locks in the price for the second year."
In general though, "no insurance company wants to tie itself down for too long".
"Insurers are risk-adverse. For example, if you sign on someone who is a bad risk, you can't do anything for two years. Of course, you can cancel the policy, but that's the last thing to do."
But the executive conceded that the two-year policy is a clever proposition when offered to owners of new cars.
"All insurers like new cars. When you own a new car, you are more careful, so it makes more sense," he said.
But there could be a downside, however, with this group of motorists. "If there is an accident, a new car will cost the insurer more because the owner would want any damage replaced with a brand new part instead of just repairing it."