Good news for motorists - insurance premiums will stay flat this year as competition continues to be keen.
The General Insurance Association of Singapore (GIA) said that, despite last year's industry predictions that premiums had bottomed out, "a notable feature in the motor insurance industry in 2016 was the entry of new market players".
"This is good as it offers motorists more options," said GIA chief executive Derek Teo, adding that new players generally try to gain market share and critical mass as they compete with existing players.
Two new insurers - FWD and Auto & General - recently entered the motor business, which remained profitable last year.
GIA said that insurers posted S$87.4 million in underwriting profit, though this was down 27.7 per cent from 2015's S$120.9 million.
The motor portfolio is the biggest in the general insurance business here. Last year, it accounted for 31.5 per cent of the S$3.65 billion in gross premiums.
The loss trend for motor continued to improve, with the insurers' loss ratio falling from 55.9 per cent in 2015 to 53.9 per cent in 2016.
Gross premiums inched up 0.4 per cent from S$1.144 billion to S$1.149 billion; the average premium crept up 0.6 per cent from S$1,195 to S$1,202.
Among the Big 3 motor insurers, NTUC Income's premium stayed unchanged at S$1,502 (see table); this is for a single, 32-year-old male working in a bank and driving a year-old Toyota Corolla Altis, with five years' driving experience and zero no claim discount (NCD).
Income's premium has been the exactly the same for three consecutive years. Peh Chee Keong, NTUC Income's vice-president and head of motor insurance, said the market leader calculates its premium rate according to the claim experience of its portfolio. "The claim experience for the Toyota Corolla Altis with such a driver profile has been consistent over the past years and we can maintain our premium rate for this profile," he explained.
AXA's premium, on the other hand, has risen 17.6 per cent to S$2,196.
But AIG's premium of S$2,378 is down 11.5 per cent. The AIG premium is based on the insurer's AutoValue plan, a basic policy which is described on its website as one "for owners of private non-continental cars looking for basic protection for car insurance needs".
Income's Mr Peh said the motor insurance market has been very competitive over the last two years, mainly due to the smaller vehicle population and only "reasonable" profit.
"We expect the competition to be strong this year, but it should ease off slightly in comparison with the last two years, as the vehicle population is maintaining about the same number in recent months instead of reducing as in past years."
But more importantly, he expects some of the motor insurers "may not be able to write profitable business with the current premium rates".
As a result, Mr Teo said GIA continues to "reiterate the significance of its members exercising underwriting prudence in competing for motor business, in addition to adopting vigilant claims-handling processes to sustain the healthy underwriting results".
He pointed out that in the near term, the rise in competition and the smaller car population are key to the overall trend in motor insurance.
"These two factors need to be carefully monitored."
samuelee@sph.com.sg
This article was first published on March 22, 2017.
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