Wednesday, November 11, 2009

Increase in motor insurance premiums

Many motorists have seen a large increase in motor insurance premiums in recent years. Some have their renewals rejected, due to bad luck or bad driving that have resulted in two or more claims. In some cases, the large claims were due to fraudulent claims lodged by third parties.

I have received e-mails of this nature from motorists over the past years, "Mr. Tan, I have been driving without any claims for more than 15 years. Last year, I had an accident. The other party lodged a large claim. The insurance company paid the claim, but did not check with me. This year, they want to increase my premium by 30%. What should I do?"

I usually advised them to find another insurance company and provided them this list of hotline numbers. However, they were unsuccessful in most cases, and most insurance companies would not want to take a motorist with a claim.

Some motorists have their renewals rejected due to two or more claims. They were not able to get another company to take over the insurance.

This may happen to a small percentage of motorists each year. For these people, getting renewals is a stressful exercise. Accidents can happen to anyone, even if you are careful most of the time. You may be careless just once, to get into trouble.

Some people who are caught in this difficult situation come to me for help. Other people who are not involved tend to say, "These drivers are reckless. They should not expect to get their insurance renewed. It is better that they keep off the roads".

This tends to be the attitude of Singaporeans, until they become the party that is personally involved. I hope that Singaporeans can be more empathic to people who are caught in a bad situation due to bad luck or circumstances beyond their control.

Tan Kin Lian


Anonymous said...

Perhaps the important question to ask is why motor insurance is compulsory in the first place.

In many countries, motor insurance is optional.

It seems like the insurance companies are having their cake and eat it.

By making motor insurance compulsory, drivers who probably don't need motor insurance are forced to buy a policy.

On the hand by allowing exclusions based on claim record, the insurance companies are able to deny motor insurance to those who really need it.

Vincent Sear said...

For those drivers who can't get insurance, but still have valid driving licences and wish to continue driving, may I suggest that LTA or ROV allow them to post a cash bond for third party damages in lieu of insurance.

Anonymous said...

Many people may not know that the law only requires one to be insured against third party injury. It is not mandatory to insure third party property damage. However, it is common in the market to offer at least full third party cover so as to safeguard both the third party and the motorist - imagine you bang into an expensive car and being sued for the cost of repair which can bankrupt you.

I will not support motor insurance being optional. Without insurance, the aggrieved party will not be assured of compensation by the motorist at fault.

Who does not need motor insurance? The savings from insurance premium will not be worth it considering the financial consequences (own damage / TP damage / TP injury) of a serious accident. Don't think it will not happen to you. BTW, accident means an event that you do not expect to happen.

wjsim said...

That a good idea!! Perhaps this scheme can be opened to everyone so that either you have a "downpayment" to self-insure against such accidents or buy insurance.

Anonymous said...

I drive for many years.

I find all the time, it is the other party at fault. Sometimes, they stop suddenly. Sometimes, they just turn without signalling.
Sometimes, they just block or road hogs.

I have never been in the wrong before, so I don't see a need for insurance myself. But I think for the rest of the drivers, please get some insurance, just in case.

If you are a bad driver, you need more insurance.

Anonymous said...

The crust of the matter is not to have your own vehicle reinstated under insurance in case of accident.

What matter most is 3rd party claim. Without a compulsory 3rd party insurance, can you imagine how many "hit and run cases" would occur.

Innocent parties may be involved in an accident.

Anonymous said...

I'm totally confused by the "it's always others' fault, never mine" mentality.

Fact: most car owners can not afford to pay a 6 or 7 digit 3rd party claim in cold hard cash.

To see if you can self-insure motor insurance, kindly check whether there's a prancing horse in your garage. (Ferrari)

KFC said...

As part of the comprehensive steps to encourage more people to take public transport, I think the government should make it more difficult and/or more expensive for car owners to buy insurance. Singaporeans (including our leaders) should start taking public transports and give up car ownership to help to save our environment...

Anonymous said...

Let's make some sense of all the convoluted arguements.

1) Motor Insurance is compulsory so you must buy it.

2) The insurance company is only keen to sell it to you if you NEVER have an accident.

3) If you have an accident and a claim is made, you get a huge increase in premium. In an extreme case, you might not even be able to get any insurance.

4) As a result of 3), many people don't make claims when they have an accident. Instead they pay cash to settle damages so that they can continue to pay low premiums to the insurance company.

Hence other than protecting you from those rare times when you wrongly ram a Porsche or a Ferrari, motor insurance seems prety much useless.

Anonymous said...

Insurance companies should consider a lower and fairer premium for those who are willing to install videocam-recorders in their vehicles. The recorder is a problem only when one is travelling through restricted zones like the checkpoints. For that one can remove the camera. Just a slight inconvenience, if the authorities at the checkpoints are more tolerant of cases of absentmindedness. While this may not solve all the dubious claim cases, it will to a large extent provide justice to careful and safe drivers. A driver who is at fault, and who has enjoyed the premium discount, MUST provide the recordings. No excuses of faulty cameras, forgetting to turn it on etc. should be accepted.

Vincent Sear said...

When I was with Prudential, there was no motor insurance department. I did sell motor insurance, but through QBE and deal with them mostly through their motor insurance manager on the phone for quotation and their despatch courier to relay the documents. I was quite lucky then. There wasn't any claims or disputes to cause headaches or heart attacks.

My real eye-opening experience on motor insurance was when I joined NTUC Income, surely having the biggest motor insurance department in Singapore. Though I wasn't directly in the department, the vibes of motor claims can be felt through the entire organisation. Some drivers and claimants are bona fide victims of accidents, however, as I'm sure T.K.L. knows better than I do, there're many frauds and cheats out there.

Vincent Sear said...

To: Aurvandil

3rd party injury motor insurance is compulsory to protect and compensate innocent victims.

For example, if you got knocked down and leg brokened, paralysed by a poor young pizza delivery man who can't afford to compensate you, what else can you do if there's no insurance?

But it's true that motor insurance isn't compulsory everywhere. I understand that in the US, some states don't require motor insurance. These are usually more rural states. They don't even really care about driving license test. Pass 50 MCQs and drive one round around the police station compound with a sergeant without knocking down anybody and you'd get your driving license.

Anonymous said...

If I am concerned about being knocked down a young pizza delivery man, then I should go an buy an accident insurance policy.

By forcing the pizza delivery man to buy third party insurance to cover me, you are creating a moral hazard problem. This is the root cause of the the inflated/fraudlant claims that are frequently observed with regard to motor insurance.

Once it has been proven that the pizza delivery man is at fault, I have no incentive whatsoever to act prudently. Instead I should go all out to claim as much as I possibly can from the insurance company. As far as I am concerned, this is at no cost to me since any increase in premium will not be borne by me.

Vincent Sear said...

You should, it cost around S$100 per year only from most insurers.

Anyway, it's a question of whether the pedestrian should be at own risk or the driver should bear responsibility. On the balance, in a civil world, I tend to think that it's the driver who should bear responsibility. A vehicle is a heavy machine and can kill. If the driver is not made to bear responsibility for it, I shudder.

Anonymous said...

If there are no consequences for hitting someone when I drive a car, then I don't see why I should exercise care and caution. Screw the pedestrian if he doesn't have insurance.

Oh wait, this sounds like what Malaysian cars are doing. Hit SG'rean on SG roads, they can simply run back to MY and avoid a claim.

If YOU (SG'rean), hits a MY motorbike, they can simply report to SG police and you can wait for the $50k injury claim to come.

Vincent Sear said...

From my experience as ex-police and ex-insurance agent, when a car hits a bike, 70% of the time the biker is killed, 20% seriously injured or maimed, 10% very lucky and survived with some bruises.

I think that insurance actuaries agree with me. If you go and buy a simple inexpensive personal accident policy, riding a motorbike is excluded unless you ask for it and pay extra.

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