By Samuel Ee

LIFE insurance agents are muscling into the motor insurance market as the number of clients dries up amid the economic crisis, and the sharply smaller new car market ensures that competition will heat up further.

But this may not be a bad thing as service standards should rise although commissions are unlikely to fall, say industry players.

One agency owner who specialises in motor insurance says he is seeing more and more life insurance agents approaching his firm to sell auto policies.

"The economic downturn means that fewer people want to buy life insurance and these agents have less business, so they are now exploring selling other types of insurance," he says.

"And among non-life insurance, motor insurance is the most lucrative."

He explains that while motor insurance commissions may be smaller than life insurance commissions, the auto segment itself is large, which means there is more business to go around compared with say, health and travel insurance or workmen's compensation.

"Typically, motor accounts for a third of non-life or general insurance," he explained.

Last year, for example, motor premiums totalled $906 million, making it the single biggest component of the $2.8 billion in general insurance premiums collected in 2008.

There are currently an estimated 13,000 registered life insurance agents but one insurance executive expects this number to rise this year.

"It could go up because a poor economy usually leads to more out-of-work people wanting to become agents," he says. "During a recession, selling insurance is a transition job."

The agency owner says that another important development in the new car market will shape the insurance landscape.

"Car buyers used to get their insurance from car salesmen but as car sales drop and more people renew the policies of their existing cars, insurance agents will have more chances to sell auto policies," he says.

He explains: "If you are buying a new car, the car distributor is probably tied to a particular insurer and you won't have much choice."

But with a smaller COE quota, less people are buying new cars. Quota year 2009 has 24.1 per cent less certificates of entitlement than QY2008.

With more motorists keeping their cars, insurance policies have to be renewed. Renewal also means more time to shop around for the best quotation, thus increasing competition among agents and ultimately leading to better service in the industry, says the agency owner.

"There should be more attentive service because the agent will have more reasons to be honest with you than a car salesman because they will use motor insurance as an inroad to sell other types of insurance," he says.

But increased competition may not lead to cheaper policies because commissions are unlikely to go down.

The gross commission is 15 per cent. If an agent's closing ratio is low, that is, if he has sold much fewer policies than quotations given, "then it may not be worth it", says the agency owner.

But he says that at the end of the day, more competition cannot be a bad thing. "Overall, the effect for consumers should be positive."

This article was first published in The Business Times.