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Motor insurers' 2015 profit eroded by competition
Keen competition has been good news for vehicle owners when it comes to motor insurance premiums but not so for the industry as a whole.
The average motor premium dipped 2.9 per cent to S$1,192 in 2015, thanks to stiffer competition among insurers fighting for market share.
As a result, underwriting profit fell 19.7 per cent to S$120.1 million from 2014's record S$149.5 million, as gross written premiums dipped 4.4 per cent to S$1.141 billion, according to the General Insurance Association of Singapore (GIA).
With the lower earned premium, the loss ratio increased to 56 per cent from 53.9 per cent.
The continued decline in Singapore's vehicle population also contributed to the revenue contraction. The total vehicle population at end-2015 was 957,246, down 1.5 per cent from end-2014's 972,037.
Still, motor insurance remains the general insurance industry's biggest class of business, accounting for 31.5 per cent of 2015's gross written premiums, which was S$3.618 billion or up 2.6 per cent from 2014.
But total underwriting profit fell 17.1 per cent to S$325 million as the other major classes were also affected by increased competition from existing and new players, as well as the economic slowdown and external headwinds, said GIA president AK Cher at a briefing on Thursday.
Nevertheless, Mr Cher said that the general insurance sector "achieved a commendable performance despite the turbulence".
Another major class is health insurance, which for the first time overtook fire insurance with S$435.3 million in gross premiums (+55.1 per cent) versus S$396.6 million (+8.8 per cent).
Health now accounts for 12 per cent of total general insurance premiums, while personal accident insurance makes up 9.6 per cent of gross written premiums with its S$345.4 million (+4.5 per cent).
Together, they add up to a hefty 21.6 per cent of the industry's gross written premiums. GIA expects them to continue growing due to greater awareness regarding the need to cover gaps in government health insurance plans, and also because of more travel insurance purchased with the increase in budget air travel.
As for the motor class, GIA was cheered by the 1.4 per cent drop in accident reports in 2015 to 148,194, as well as the 8.9 per cent fall in incurred claims to S$538.9 million.
It attributed the reduction to more careful driving following GIA initiatives to introduce the proper procedure for reporting motor accidents and prompt reporting, among others.
But the association, which has 35 members of whom 21 actively write the motor business, said that it would emphasise the importance of underwriting discipline so as to avoid returning to the previous decade's massive losses.
In 2008, the motor insurers suffered S$214.1 million of losses, with the industry managing to turn around only from 2011.