They save on agent commission, but motorists should still shop for quotes
GOING online for generally costs less but it all depends on the individual driver and the insurer's assessment of his or her risk profile.
Two online insurers - Aviva and DirectAsia.com - have entered the Singapore market in the last three months and both have promised that the direct-to-consumer model will result in lower premiums as there are no commissions. Unlike traditional insurers, insurance websites bypass the traditional agent.
Aviva began operations here in April and says that its 'low cost operating model' allows it to pass 'healthy savings' to its customers.
'On average, customers will save around 7 to 10 per cent by switching to Aviva, and in some cases, they could realise substantially bigger discounts,' says Paul Jackson, Aviva Singapore's head of general insurance.
He adds that Aviva also offers flexible options. 'For example, after generating a 60-second quote, customers can save up to a further 25 per cent by increasing their excess or restricting who can drive their car,' explains Mr Jackson.
Taking the example of a 32-year-old single male working in the banking sector with a one-year-old Toyota Corolla Altis and who has five years' driving experience and zero no-claims discount (NCD), Aviva quotes a premium of $1,839 (see table).
But over at DirectAsia.com, the equivalent premium is higher at $2,184. In fact, DirectAsia.com's premium costs more than the $2,157 quoted by Singapore's leading motor insurer, NTUC Income.
But the online insurance portal, which was launched last month, says that different insurers will be better priced for different cars, usage and drivers.
'We would say that DirectAsia.com is better priced in most cases for privately used cars for drivers with good NCD and a Certificate of Merit,' says Andrew Byrne, CEO of Direct Asia Insurance.
Under the same conditions, the Toyota Corolla Altis owner would pay a premium of only $1,967 if his car was for private usage only, that is, if it was not used for commuting to work.
Mr Byrne explains that insurers calculate their car insurance premiums individually using a combination of information called rating factors.
'We estimate that DirectAsia.com would be on average around 10 per cent cheaper but this will vary up to 25 per cent cheaper for privately used cars and drivers with good driving histories,' he adds.
He also points out that DirectAsia.com provides the owner with his or her choice of repairer as a policy option for an additional premium - something that may not be offered elsewhere.
One motor insurance veteran says that DirectAsia.com's different pricing for different types of drivers is not unusual.
'Every insurer has its likes and dislikes based on its experience,' he explains. 'So it is always better for a car owner to shop around for a few quotes and compare premiums.'
Mr Byrne himself advocates shopping around, if only because online insurers do not pay commissions to agents. 'If car owners only use an agent to get comparative quotes, they will miss out on prices from the direct insurers like Aviva and DirectAsia.com,' he says. 'Agents will only recommend insurers who pay them a commission, which is typically 15 per cent or about $190 for each policy, but can be as much as 25 per cent on a new car through a dealer.'
Looking ahead, Mr Jackson says that the motor insurance industry is coming out of a difficult period of heavy underwriting losses, which resulted in dramatic rate increases and 'even greater pressure on already cost-burdened motorists'.
'We believe that rates will level off this year and it's those consumers who choose to buy direct who will benefit from the most competitive renewal quotes,' he says.
Mr Byrne agrees. 'Due to the entry of the new direct players, we expect that industry premiums will likely stay steady over the next year,' he says. 'We understand, however, that some insurers have 'smoothed' premium increases to their policyholders over the last year and will still be applying further increases on renewals this year.'