A recent report stated in the first half of 2018, motor insurers booked in $12 million in underwriting losses, despite the total number of accidents dropping by 4.3%.
Industry watchers pointed to an increase in private-car hires and use of personal mobility devices as the cause of a 12% spike in motor insurance claims, which saw the motor insurance industry taking its first-ever loss since 2017 amid the highest traffic accident rates on Singapore’s roads since 2008.
Because quotes for car insurance can vary wildly from one insurer to another, it can be confusing trying to make an educated decision. What are insurers really looking at when determining the risk profile of an applicant? What goes into calculating the premium?
To help you along, here are the 5 factors that determine how much car insurance premiums you end up paying.
Factor 1: Age and gender
The first two factors insurers consider are also the most basic: the age and gender of the driver.
It comes as no surprise that insurers charge differently according to different age bands. And as you’d suspect, younger drivers are charged much higher premiums than their more mature counterparts.
No big mystery here: young drivers tend to be “newbies” and also less experienced handling their vehicles. This points to a propensity to get into accidents: a fact corroborated by years and years of traffic accident data kept and studied by insurers.
As for gender, guess who pays more, men or women? If you said women, you’d be wrong (and also holding on to a tired stereotype that women are bad drivers.)
Although not all insurers practice this, male drivers can expect to pay more than female drivers for car insurance. This is because males are 1.4 times more likely to get into a road accident, as discovered by Singlife (and no doubt others).
Factor 2: Your occupation and how you use your car
Another pair of co-related factors that affect your car insurance premium is your occupation, and the usage patterns for your vehicle.
Firstly, some insurers increase your premium depending on the occupation of the driver. For example, roving salesmen and house-call technicians may pay more for their car insurance, compared to say, an office manager.
The reasoning goes that the more time you spend on the road, the higher your chances of getting into an accident. Hence, some insurers charge a loading to account for this risk.
Similarly, other insurers may look at your vehicle usage patterns. If you drive your car recreationally, only using it a few times a week, you may enjoy lower premiums. You may also register as an off-peak driver to the same effect.
The thinking goes that there’s a lower chance of an accident happening if you avoid driving during peak periods.
On the flip side, those who drive during peak periods pay higher premiums. This is due to the increased chances of accidents, as statistically shown.
Factor 3: Driving experience, record and No Claim Discount
More experienced drivers pay lower premiums than drivers holding newly minted driving licences. Even if you start off with an insurer that charged high premiums in your initial years, expect your premiums to come down as you notch up more hours behind the wheel.
If you have a clean driving history with no record of fines or demerit points with the Singapore Police Force for the past three years, you can also be entitled to a Certificate of Merit (COM). This Certificate of Merit entitles a driver to a discount on vehicle insurance premiums from participating insurance companies, over and above the No Claim Discount (NCD).
Another factor that insurers take into consideration is your No Claim Discount, which you build up by staying clear of accidents in which you have more than 20% culpability.
Low-risk drivers with long safety records can achieve No Claim Discounts of up to 50%, but do remember that isn’t the only factor that goes into determining how much car insurance premiums you pay. However, you can expect your premiums to be discounted by a figure close to your prevailing No Claim Discount.
Maintaining a high No Claim Discount is one of the more reliable ways to lower your car insurance costs. However, if you are found to be at fault in an accident, you will be penalised by having your No Claim Discount lowered by 30%. This can mean extra hundreds of dollars on your premiums.
To get around this, look for a car insurer that offers protection for drivers with high No Claim Discounts. In other words, you won’t have your No Claim Discount reduced even if you were found to be at fault.
If your insurer doesn’t offer complimentary 'No Claim Discount' protection, or if you are in the process of building up your 'No Claim Discount', consider purchasing a 'No Claim Discount' protector feature.
Factor 4: Claims filed in the last 3 years
Not surprisingly, insurers look at your track record to assess your driving habits and level of risk, which influence how much premium they will charge you.
However, they pay particular attention to the number of claims you have filed in the immediate past 3 years; in fact this is a standard question found on most car insurance application forms.
And you guessed it: if you indicate you have filed a claim in the past 3 years, your premiums are almost guaranteed to go up. Why is this so? After all, having experienced an accident recently, won’t you be even more careful driving henceforth?
Well, it may seem unfair, even arcane, but statistics indicate that drivers who file a claim have a significant chance of filing another claim while still insured. (Yeah we know, it sounds like a curse.)
Factor 5: Make and model of your car
The model and condition of your car can also play a part in determining your final car insurance premiums. Insurers tend to weigh several factors about your vehicle, including:
- Is your car a premium model or an SUV? Higher-end cars with more expensive parts will cost more to repair. Hence luxury cars and SUVs will be more expensive to insure, with continental cars attracting a significant loading.
- How old is your car? Some insurers tend to charge more premiums on brand new cars, whereas premiums tend to increase only very slightly once past the 10-year threshold. In determining the age of your car, insurers will ask for your vehicle’s registration date or even manufacturing date.
- How powerful is your car? Generally, cars with higher engine capacity attract higher premiums, while less powerful cars are cheaper to insure.
What does car insurance cover exactly?
Apart from the obvious cost of damage to your car in case of a traffic accident, car insurance also covers:
- Theft in case your car is stolen by car thieves. (Don’t laugh, this really happens!)
- Damage in case of a fire
- Financial liability to third parties, in case you are at fault for the accident
What types of car insurance are there?
There are three main types of car insurance in Singapore.
Comprehensive car insurance: This covers almost everything, including your own car's repairs, replacement of spare parts and damage to third parties. It is the most common car insurance type in Singapore, and is our recommended suggestion.
Third Party Only (TPO) car insurance: This is the cheapest and most basic type that covers only damage to other people or their property. If anything happens to your own car, you’re on your own and have to fork out the damages yourself. This is recommended for really old cars that you are going to trade-in at the end of your COE.
Third Party, Fire & Theft (TPFT) car insurance: This is an upgraded version of TPO car insurance which covers loss, theft and fire damage to your car. It offers slightly more protection but again is generally reserved for owners of older cars.
What is excess and how does it impact my premiums?
"Excess" refers to the amount you need to pay out of pocket before you can make a claim from the insurance company. Most insurers in Singapore generate quotes based on a $500 or $600 excess. Both “excess” and premiums are costs borne you, so when obtaining car insurance quotes, look at both holistically. No point being seduced by a car insurance policy with a cheap premium but high excess (such as $1,000 and above) when you really get into an accident.
Why does the choice of workshops matter?
Most car insurance plans allow you to choose between "authorised workshops" and "any workshop" (which is still covered by your car insurance). As a general rule, it’s always better and cheaper to opt for "authorised workshops" version because your car insurer already has a list of workshops that it knows are affordable and have a good record of not overcharging car owners.
On the other hand, if you want the option of going to “any workshop” of your choice, the insurer has no way of making sure it won't overcharge, so you will have to pay more for that privilege. This is also why, in the case of an accident and the other party says, “let me get a quote/get it fixed from my own workshop”, you need to be extremely wary.
If your car is still new and under warranty, as a general rule, go back to your authorised car dealer's workshop because a) take advantage of the warranty! And b) your warranty may be considered void if your mom-and-pop car workshop uses any knock-off spare parts.
Any final things to consider before buying car insurance?
If you’re reading this section of the article, you now know what to look out for before knowing what to compare when buying car insurance.
A few additional things to consider:
- Does the plan include 24-7 roadside towing and assistance? You don’t want to be stuck in the middle of the PIE at 2am in the morning, and have to call a 24-hour towing service and be charged for it.
- No Claims Discount (NCD) guarantee: You don’t want one accident claim to bring your total NCD down to zero and spend years bringing it back to 50% and higher. Some car insurers offer lifetime NCD guarantee or NCD protectors that mean you don’t have to start from scratch in case of a claim.
- Don’t auto-renew your annual car insurance premium: Car insurance premiums change year to year depending on a range of factors, as listed earlier in this article. Always seek to compare at least three car insurance quotes when it’s time to renew your premiums -- don’t miss out on a chunk of potential savings!
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Note: This is only product information provided. You may wish to seek advice from a qualified adviser before buying the product. If you choose not to seek advice from a qualified adviser, you should consider whether the product is suitable for you. Buying an insurance product that are not suitable for you may impact your ability to finance your future healthcare needs.
If you decide that the policy is not suitable after purchasing the policy, you may terminate the policy in accordance with the free-look provision, if any, and the insurer may recover from you any expense incurred by the insurer in underwriting the policy.
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