HIGHER premium rates for car insurance look almost certain, after the motor
sector suffered a second consecutive quarter of losses.

Rises could be between 5 and 10 per cent, according to one insurer, as the
industry battles higher claims.

Motor underwriting losses for the three months to June 30 totalled $27.8
million, against a profit of $3.6 million a year earlier.

That brought the motor sector's six-month deficit to $42 million, against
earnings of $14.5 million a year ago, according to the General Insurance
Association of Singapore (GIA) yesterday.

The losses came despite an 8.5 per cent rise in gross premiums in the first six
months of the year to $391.9 million, from $361.2 million a year earlier.

Last year, the motor insurance portfolio incurred an underwriting loss of
$625,000. That was after two years of profits, which had led to a decline in
premiums.

But the past two quarters of red ink means the motor insurance sector will
experience a "significant loss" this year, a result unacceptable to GIA
members, said the association's president Derek Teo.

He said: "We can see that both the frequency of claims and their severity are
increasing on the motor account. As I have warned before, motor premium rates
will have to rise and it is only a matter of time before they do so."

Market observers said major insurers such as AIG and NTUC Income are "very
likely" to increase premiums because of sustained losses. Both insurers have a
combined motor market share of 48 per cent.

An Income spokesman said the cooperative will raise car premiums by 5 to 10 per
cent on average, to reflect its claims experience across the different
segments.

In the last six months, Income has seen a "deterioration in its motor
underwriting results, which is reflective of the industry's experience", he
added.

Income's motor market share grew to 24 per cent in the second quarter, from 20
per cent in the preceding three months.

AXA Insurance Singapore ? which accounts for 13 per cent of the motor insurance
market ? said it has made a profit on its portfolio so far this year.

Chief executive Patrick Font said AXA has not moved motor prices significantly.
The insurer's policy is to adjust pricing up and down continually.

"We ensure that each customer pays the right price when they come on board," Mr
Font said.

The malaise in the motor sector is affecting the entire industry. In the first
half of the year, underwriting profits for the general insurance industry slid
to $87.5 million, from $108.7 million in the same period last year.

This was despite a 14 per cent rise in gross premium income to $1.34 billion
for the first six months of the year.

The GIA attributed the decline in underwriting profit to "a steep rise" in
motor claims.

Motor is the largest single class of general insurance in Singapore, accounting
for almost 30 per cent of total premium income.

On a brighter note, the long-term, money-losing class of Workmen's Compensation
is showing signs of a turnaround.

Gross premium income in the sector rose to $124.2 million for the first half of
the year, from $94.6 million a year earlier.

The overall underwriting loss for the first six months of this year fell to
$5.1 million, from $8.1 million for the first half of last year.