As technology grows smarter and more sophisticated, companies the world over have wasted no time trying to figure out how it can be utilized to improve the way they do business. Insurance companies are no exception. Merely in the last two years, we have begun to see motor insurers in Singapore begin to implement innovative new technology to track driver behavior and better assess risk through telematics systems, with the hope that more accurate data will help them cut costs and boost revenue. And insurers are not the only party who can benefit from the use of telematics: to incentivize consumers to install and use these systems, insurers such as NTUC Income, AIG and Etiqa have begun to offer heavily discounted car insurance premiums to drivers willing to take the plunge. So how much could Singapore actually save on car insurance if we all installed telematics systems in our cars today? Our team at ValuePenguin crunched the numbers to find out.
Telematics Could Help Singaporeans Save S$122mn on Their Car Insurance Premium
In 2016, the General Insurance Association of Singapore reported that Singapore spent about S$1.2 billion dollars in car insurance premiums. But it may not be necessary for us to spend so much this way. In fact, based on our analysis, Singapore could save over S$122,000,000 on car insurance premiums every year if we took full advantage of the discounts currently available to drivers who install telematics systems in their cars. There are currently two different ways that insurers in Singapore give motorists opportunities to save on car insurance by using telematics systems to monitor their driving: by clocking low mileage and by driving safely. Let’s take a closer look at how the total amount Singapore spends on car insurance every year would be affected given the telematics-using car insurance solutions currently available in the Singapore market.
How much could low-mileage drivers save in Singapore?
The steepest discounts are available to motorists who drive significantly less than the average driver. This idea makes a lot of sense, as the less you drive, the lower the odds are that you will get into a car accident – so why should drivers clocking low mileage have to pay as much as the average driver to insure their car? Etiqa and NTUC Income are two examples of insurance companies that offer high discounts to low-mileage private car drivers who install their respective telematics systems in their vehicles. Etiqa offers a 50% discount upfront on your car insurance premium if you can drive a maximum of 6,000 kms a year, while NTUC Income offers a car insurance discount of 35% if you drive under 5,000 kms a year and 20% for driving between 5,000 and 9,000 kms a year. So what’s the possible impact these discounts could have on what we spend on car insurance every year?
It turns out that as impressive as these discount offers sound, a very small percentage of Singapore’s driving population actually stands to benefit from them. Our analysis indicates that the average Singaporean drove about 16,800 kms per year in 2016*. Based on that figure and assuming a normal distribution curve, this means that only 0.51% of Singapore’s private car drivers, or about 2,571 people**, drive under 6,000 kms a year and would be able to qualify for the highest car insurance discount on the market, Etiqa’s offer of 50% off on your premium upon purchasing the policy. The GIA reported that the average annual insurance premium paid in Singapore in 2016 was S$1,202. Assuming the average car insurance premium, this would result in savings of roughly S$1,545,300 year on car insurance premiums***.
Although only a small percentage of Singapore drivers would be likely to qualify for this highest available discount based on our estimates of Singaporeans’ driving habits, more drivers would still be eligible for reduced discounts at higher annual mileage. For example, both Etiqa and NTUC Income provide varying degrees of discount for people who drive more than 6,000 kms a year but less than the average person. We estimate that there are about an additional 13,400 people who could receive discounts of up to 20% on their auto insurance, which could add up to another roughly S$3.2mn of potential annual savings resulting from telematics.
How much could the rest of us save?
Even more money could be saved if those of us who clock a more typical amount of mileage attempted to earn discounts for driving safely by way of new telematics plans. Both NTUC Income and AIG currently offer Singapore drivers opportunities to earn discounts on their car insurance premiums by achieving high scores for safe driving behavior, and more insurers are likely to follow the trend in coming years to offer telematics-using options of their own.
NTUC Income currently edges out AIG for offering the best deal on car insurance for the safest drivers, discounting premiums by a maximum of 20% if you’re able to score above a 95 out of 100 for driving safety using NTUC’s telematics technology compared to AIG’s maximum discount of 15% for scoring above a 94 out of 100. If all Singapore drivers who could not qualify for the higher discounts available for low mileage bought NTUC Income’s safety-based telematics-using car insurance plan and achieved driving safety ratings high enough to qualify for the maximum 20% discount, these drivers could save over to S$117,370,000 on gross car insurance premiums. Added to the savings we estimated could be earned if low-mileage drivers all bought telematics-based car insurance plans, this could result in a total of S$122,070,000 dollars saved on car insurance premiums in Singapore.
Final Thoughts
Our estimates of how much Singapore could stand to save if we took full advantage of telematics-based car insurance schemes are just that–estimates. This technology is still relatively new, and we have yet to see more than a few insurance companies implement it in their car insurance products. But we hope that our study makes clear the larger point that advance of technology is bringing us closer to an era in which each financial product we buy is personalized exactly to our needs–and hopefully in which we can pay exactly the amount we should for necessary evils like car insurance. So keep an eye on telematics–you could find yourself in a position to save hundreds, if not thousands, of dollars a year.
Footnotes
- The most recent official statistics from the Singapore government reflect 2014 data. We arrived at this estimate after assessing official LTA statistics from 2006 through 2014, which indicate that the average annual kms driven per private car have decreased by an average of about 2% each year during that time period.
** We arrived at this estimate using the total private car population in Singapore in 2016 (504,160 according to the LTA). 0.51% x 504,160 = 2,571.216 private cars that qualify for this car insurance scheme.
*** Disclaimer: All estimates of car insurance premiums or possible savings in this article assume an average car insurance premium of S$1,202, which was reported by GIA to be the average car insurance premium paid in Singapore in 2016. But this average reflects the mean of all car insurance premiums paid, not just the ones paid to the insurers that offer discounts for drivers willing to use telematics systems. Do note that this figure is very similar to our estimate of the average cost of car insurance in Singapore. Total savings possible would therefore differ depending on how closely car insurance premiums offered by the insurers offering discounts (Etiqa, NTUC Income and AIG are the ones discussed here) hewed to the average.
The article How Much Can Technology Actually Help Singaporeans Save on Car Insurance? originally appeared on ValuePenguin.
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