Insurers have great pricing power.
The low car ownership rate in Singapore will not deter motor vehicle insurers from hiking premiums this year, according to a report by BMI Research.
BMI expects motor vehicle insurance premiums to rise by 5.2% this year, bringing the segment’s total value to a whopping $1.3 billion in 2016. Premiums should continue to rise at mid-single digit rates over the next four years, such that the segment will amount to $1.6 billion in 2020.
“Motor vehicle insurance (including both compulsory and voluntary covers) is the largest domestic insurance sub-sector. It accounts for a little less than half of premiums pertaining to Singapore risks and just over 10% of total premiums written in the non-life segment. We think that it will expand more rapidly than most of the other domestic insurance sub-sectors (with the exception of health insurance),” BMI Research said.
"The overall size of the motor vehicle insurance sub-sector, which accounts for somewhat less than half of the domestic insurance business in terms of business written, is constrained by the low ownership of motor vehicles. Nevertheless, the motor vehicle insurers appear to enjoy pricing power, and should continue to achieve growth in premiums as a result,” the report added.
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