DRIVERS can expect to pay more to insure their vehicles after motor insurers endured their worst quarter in the past seven years.
The tide of red ink for the three months to Sept 30 rose to $63.5 million, up from losses of $40 million in the same period last year.
This was despite 28 per cent growth in motor gross premium income to $221.8 million for the quarter. Gross premium income for the nine months was up 20 per cent to $672.9 million.
The General Insurance Association (GIA) attributed the poor performance to the lethal combination of price undercutting among insurers and mounting claims. "These third-quarter figures and the motor losses reflect intense competition between insurers along with inadequate average premium prices," said GIA president Derek Teo. In May, premiums had soared 20 per cent from a year ago among the bigger insurers such as American Home Assurance and NTUC Income.
Mr Teo expects the premium hike to continue: "Motor insurers which suffered losses have no choice but to increase premiums because their losses are going up higher than the premiums they received. "For those which already raised their premiums, they would find that it is not adequate and they would continue to increase their premiums incrementally."
Net incurred motor claims for the nine months was $544.5 million, up 29 per cent on the same period last year, with the net incurred loss at $152.6 million.
Mr Teo added that the spike in motor claims was also the result of the Motor Claims Framework launched in June. It requires that claims be reported and settled far faster than in the past.
GIA hopes the claims situation will improve once the benefits of the new framework kick in.
Still, there were some bright spots. The general insurance industry had a gross premium income of $2.18 billion for the nine months to Sept 30, up 16 per cent. Total gross premium income in all classes for the September quarter rose 24 per cent year-on-year to $708.4 million.
GIA attributed the hike in gross premium income over the nine months to a strong Singapore economy and greater volumes of insurance sales.
However, overall underwriting profits slid to just $24.8 million, a 77 per cent drop on the corresponding nine-month profit last year of $111.4 million. This was due partly to continuing losses in motor, the largest single class of business here.
In this period, marine cargo and hull, fire, personal accident and health classes all registered underwriting profits, although numbers were generally down in most classes compared to last year.
Workers' compensation, a traditionally loss-making class, cut underwriting losses to $10 million over the nine months, down from $11.7 million last year.
This article was first published in The Straits Times on Nov 13, 2008.
