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Car insurance premiums down by up to 20%; further slide expected
NEW car prices may be high but motorists are getting some relief from lower insurance premiums, which should continue to slide in 2015 because of intense competition.
Motor insurance premiums have fallen by as much as 20 per cent from a year ago and could slip further still as competition hots up among insurers after the industry's stellar results last year.
Motor insurers had stayed in the black for a fourth straight year in 2014 after posting underwriting profit of S$149.5 million, up from S$59.1 million in 2013 and the best showing since record losses of S$214.1 million in 2008.
The General Insurance Association of Singapore (GIA) attributed it mainly to adjustments to loss-reserving from a few insurers, or the previous over-provision of claims. But the strong profit is also the result of successful measures taken in recent years to improve report filing while tackling fraudulent claims, among others.
But the steadily improving profits are attracting more insurers to the motor line, which is the biggest class for the industry, accounting for 33.8 per cent of gross written premiums in 2014. Competition has intensified, as more insurers expand their motor portfolios and newcomers enter the ring.
GIA currently has 34 members, of which 25 are actively writing the motor business. But the top three motor insurers remain NTUC Income, AXA and AIG, in that order. Together, they account for about 51 per cent of the market based on premiums.
Market leader NTUC Income, with a share of about 19 per cent, offers the lowest premium of S$1,502 for a 32-year male car owner working in a bank and driving a one-year-old Toyota Corolla Altis with zero no claims discount (see table).
AXA, with about a 17 per cent market share, has the next lowest premium of S$1,798. The premium by AIG, whose market share is approximately 16 per cent, is the highest at S$2,486 but this is also down from a year ago.
Overall, the average car premium was S$1,103 in 2014, or down 3.8 per cent from a year earlier, according to the GIA. This compares with a 1.8 per cent drop to S$1,227 in the average premium for all vehicles.
As at end-2014, there were 972,037 vehicles in Singapore. Of these, 616,609 were cars. As the largest motor insurer in Singapore, NTUC Income covers a total of about 240,000 vehicles, or one out of every four vehicles.
"The reduction in premium is in part due to the periodic adjustments that we carry out to reflect our better claims experience," explained Peh Chee Keong, NTUC Income's vice-president for motor insurance. "Another contributing factor is market competition."
He said that with better underwriting results and a limited vehicle population, Income expects competition for the motor insurance market to be keen "over the next two years".
"Such competition is likely to lead to lower premiums," added Mr Peh.
Another reason for the strong competition, according to the owner of a mid-sized agency, is the shrinking motor insurance pie. He pointed to 2014's gross premiums of S$1,193 million, which are 1.8 per cent lower than 2013's. Gross premiums started falling in 2012.
"With less premiums to go around, everyone is hungry for business," he said.