Up to 20 percent drop in car insurance premiums

New car prices may be high but motorists are getting some relief from lower insurance premiums, which have fallen by as much as 20 percent and should continue to slide in 2015 because of intense competition, reported The Business Times.

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 percent 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 percent of the market based on premiums. Overall, the average car premium was S$1,103 in 2014, or down 3.8 percent from a year earlier, according to the GIA. This compares with a 1.8 percent drop to S$1,227 in the average premium for all 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, NTUC 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 percent lower than 2013's. Gross premiums started falling in 2012. "With less premiums to go around, everyone is hungry for business," he said.