Singapore's general insurance industry growth slows in 2016

Singapore

GROWTH in Singapore's general insurance industry was slower in 2016 given the intense competition and what the General Insurance Association (GIA) described as "Singapore's economic maturity".

Total gross premiums for the 12 months was up marginally by 0.6 per cent to S$3.7 billion, slower than the 1.1 per cent rise recorded in 2015, as higher gross premiums in motor, health, fire, personal accident and marine and cargo hull segments were offset by the fall in the work injury and compensation business.

The industry's underwriting profit fell 16.8 per cent year on year to S$258 million, led by margin compression, while loss ratio remained flat at 49.2 per cent last year, compared with 49.9 per cent in 2015.

On the offshore insurance side, gross premiums rose 40 per cent to S$1.9 billion. But underwriting losses worsened by 8.5 per cent to S$19.1 million.

GIA president AK Cher on Tuesday said: "The general insurance industry was challenged by both domestic and external headwinds in the past year. Against the many uncertainties, the industry still managed to deliver a fair performance."

In motor insurance, the largest sub-segment at 31.5 per cent and similar to 2015, gross premiums remained flat at S$1.15 billion, up only 0.9 per cent from the previous year, due to improved loss ratios.

Loss ratio for the year improved to 53.9 per cent in 2016 from 55.9 per cent in 2015. This, as incurred claims went down to S$494,434 in the year from S$540,110 in 2015 with better claims management, even though the number of accident reports spiked to more than 161,300 in 2016, compared with 149,500 in 2015.

While the motor insurance industry remains profitable, underwriting profit for the year was down 27.7 per cent year on year to S$87.4 million.

New market entrants helped keep motor premiums largely stable last year and the average motor premium stood at S$1,202, just a touch above 2015's S$1,195.

GIA said in 2017, motor premiums are "likely to remain flat due to keen competition among existing insurers from newcomers".

Over in health insurance - the second largest sub-segment comprising mainly group employee benefits business - there was an underwriting loss of S$18.7 million, despite a 15.6 per cent rise in gross premiums to S$503.5 million. In 2015, it recorded an underwriting profit of S$0.6 million.

In tandem with escalating medical costs and hospitalisation claims, the loss ratio for the health insurance segment worsened to 73.4 per cent last year from 65.8 per cent the previous year.

Both the fire insurance and personal accident sub-segments recorded growths in both gross premiums generated and underwriting profits in 2016, with improved loss ratios.

Underwriting loss in the marine cargo and hull operations widened further from S$2 million in 2015 to S$7.7 million in 2016 due to greater competition, despite a 6.9 per cent rise in gross premiums to S$216.9 million.

As private sector construction activity continued to ease, work injury compensation's gross premiums slid 8.7 per cent to S$352.5 million and underwriting profit was 33.8 per cent lower at S$24.7 million.

GIA said it expects headwinds of 2016 to remain this year. "Slower economic growth coupled with greater competition are likely to be recurring features in the operation environment."

It added that against such a backdrop its focus for the year is on three areas - the agents' registration board, the fraud management system for motor and travel claims, and insurtech to improve operational efficiency in the industry.

Since January, GIA has been trying out the fraud management system and said it is "encouraged" by the results. Mr Cher said the system is now being tried on motor claims and could possibly be extended to travel claims too.

The association is also urging members to embrace sustainable practices by adopting the environmental, social and governance principles, such as the United Nations (UN) principles for sustainable insurance and UN principles for responsible investment.