RIDEBOOKING app Grab and insurance group AXA Insurance Singapore on Wednesday introduced AXA Pay-As-You-Grab (PAYG), a usage-based commercial motor insurance for private-hire car drivers that charges premiums based on distance travelled.
The new offering, believed to be the first-of-its-kind in South-east Asia, could well "change the game" for the ridebooking industry, market observers said. It comes two months after Grab launched free group personal accident insurance coverage for its private-hire vehicle passengers.
AXA PAYG drivers will pay a flat rate of 70 per cent of their commercial motor insurance base premium, and an additional S$0.06 per kilometre driven on Grab rides. The total chargeable amount will be capped at 100 per cent of their base premium. Grab said: "This means drivers will never pay more than their traditional commercial auto insurance premiums . . . saving up to 30 per cent."
Traditionally, private-hire car drivers are charged a fixed annual premium at one go, regardless of whether vehicles are driven for personal or Grab use, or the distance travelled.
AXA Insurance Singapore chief Doina Palici-Chehab said: "One key barrier for drivers, especially part-time drivers, is the regular fixed insurance premium model. With flexible driving hours, paying a fixed premium does not make economic sense for them."
Currently, over 40 per cent of GrabCar (Grab's private-hire car service) drivers drive less than 10 hours weekly. Grab Singapore head Lim Kell Jay told The Business Times: "Demand for rides can triple during peak hours. With the new AXA PAYG policy, the cost barrier to entry for new private-hire vehicle drivers will be lower, and this will increase the supply pool of drivers to help meet demand."
AXA PAYG is offered through an exclusive partnership with AXA. While only registered GrabCar drivers are eligible for the policy, it is not mandatory for them to sign up for AXA PAYG.
Lee Der-Horng, director of the NUS-LTA Transport Research Centre, described AXA PAYG as "industry driven" and "competitive". He said that the scheme would attract more private-hire car drivers because of the cost savings it brings. "Currently, commercial vehicle insurance is still two to three times more expensive than private vehicle insurance."
The supply of private-hire vehicles is a key concern of every ridebooking operator, he added. "Grab's collaboration with AXA will make Grab more attractive than Uber, but I expect Uber will soon do the same."
When contacted, an Uber spokeswoman said that Uber requires all its private-hire vehicles here to have compulsory auto insurance that complies with the Motor Vehicles (Third-Party Risks and Compensation) Act, although policies may vary.
Meanwhile, AXA PAYG gives drivers the flexibility to pay in 12-month installments, and provides coverage for third-party liability. Following its launch in Singapore, AXA PAYG will make its way to Grab's five other markets - Indonesia, the Philippines, Malaysia, Thailand and Vietnam.
The next step, said Grab and AXA, is to leverage anonymised telematics data (for example, speed, braking patterns etc) from Grab drivers to help AXA better price insurance premiums and Grab incentivise safe driving behaviours.
Matthew Maguire, Singapore Acturial Society president, said: "Telematics offer feedback on how well drivers have driven; this is better than customer feedback. And this gives more confidence to passengers."
On Wednesday, NTUC announced that the National Private Hire Vehicles Association has been registered to ensure that the growing pool of drivers of such vehicles are cared for, fairly treated, and grow with market needs.