General insurance sector posts turnaround in underwriting profits in 2020, but this may not be sustainable: GIA

PANDEMIC restrictions helped the general insurance sector to achieve underwriting profits in several segments of business in 2020, as claims in segments like travel and motor dropped.

The underwriting profits, however, may not be sustainable. Following the lifting of the "circuit breaker", normal traffic patterns have resumed and motor accidents have seen an uptick, said the General Insurance Association (GIA).

In 2020, growth in general insurance was flat with a marginal 0.2 per cent slide in gross written premiums, amounting to S$4.09 billion as at end-December.

Underwriting profit came to S$237.3 million, compared to an underwriting loss of about S$28 million in 2019.

As restrictions are progressively eased in the second half of the year, key economic and social activities are expected to regain traction. GIA expects a gradual return to pre-pandemic performance in 2021. The number of monthly accident reports are back to more than 80 per cent of December 2019 levels, for instance.

In response to queries, GIA president Craig Ellis said Covid-19 has impacted the general insurance segments of business differently. Travel insurance revenue was most severely affected, dropping 72.8 per cent. Credit insurance and surety bonds were hit as defaults rose. Motor claims dropped following improvement in the overall traffic situation.

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"While we saw lower claims for the Employers' Liability segment when certain workplace activities were suspended during the 'circuit breaker', the number of workplace accidents has begun to rise since the 'circuit breaker' was lifted," said Mr Ellis.

Health insurance has grown as consumers prioritise health protection during the pandemic. The property segment also turned around, and GIA attributed this to downward adjustments in market capacity and the impact of changing rates.

Mr Ellis said the industry's overall underwriting profit was 5.8 per cent of 2020 revenue. Total revenue was almost unchanged from 2019. "... this means the improvement in underwriting profit can be attributed to improved claims, which impacted different segments differently in 2020."

"Insurance supports the economic activity of our customers across the whole economy, in all segments of industry and commerce. As some business segments like aviation, hospitality and leisure continue to await recovery, total economic activity, retail sales and container throughput are close to normal. These suggest that total claims activity will also pick up in line with economic activity, especially for Q2 2021 compared to the 'circuit-breaker' period in 2020," he said.

Motor insurance saw an increase of 0.7 per cent to S$1.13 billion in gross written premium, and recorded an underwriting profit of S$104.5 million in 2020. In 2019, the segment recorded S$1.12 billion in gross written premium and an overall underwriting loss of S$17.4 million. (see amendment note)

Mr Ellis said motor insurance revenues have been stable for the past four years. "In two of those years, the motor segment made losses and in the other two we made profits. This shows the unpredictability of the motor insurance business and the challenge of predicting price trends."

In travel insurance, gross written premiums in 2020 fell by 72.8 per cent to S$57.5 million, compared to S$211.4 million in 2019. The segment saw an underwriting profit of S$5.2 million in 2020.

A survey GIA conducted with YouGov found that usage-based insurance (42 per cent) and Covid-19 insurance (41 per cent) were seen to be topmost unmet needs. More than one in four (28 per cent) also deemed hospital cash insurance as the most important benefit this year.

Amid heightened digitalisation, most respondents - including younger digital natives - preferred to purchase general insurance through insurance agents and brokers, "highlighting the need for human touch when dealing with more complex transactions", said Mr Ellis.

"These learnings, as well as the rise of emerging threats such as cyber risks and climate change present an opportunity for general insurers to accelerate our pursuit of innovative solutions to meet changing needs, while aligning with national priorities."

Amendment note: A previous version of the article stated motor insurance saw an increase of 0.7 per cent or S$1.13 billion in gross written premium. The General Insurance Association clarified it is actually an increase of 0.7 per cent to S$1.13 billion.