Why Is Motor Insurance Getting More Expensive?

This post was originally posted on Planner Bee.

Are you feeling the pinch of rising motor insurance rates? If you’re a vehicle owner in Singapore, you’ve probably noticed your premiums creeping up, adding to the overall cost of owning a car.

Higher insurance costs are frustrating, and it’s hard not to wonder why our rates keep increasing.

This article breaks down the main reasons behind these rising costs in Singapore. We’ll explore what’s driving premiums higher, how this impacts vehicle owners like you, and what you can do to manage your insurance expenses better. Whether you’re renewing your policy or shopping for a new one, these factors can help you make smarter decisions about your motor insurance.

Overview of current motor insurance rate trends

Motor insurance premiums are on the rise, with a 15% increase in gross written premiums reported in 2023. This hike is driven by higher repair costs, frequent and severe claims, and broader economic factors such as inflation and supply chain disruptions, reflecting similar trends seen globally.

Higher costs of repairs, more frequent claims, and general inflation are just some of the factors pushing premiums up. As a result, many drivers are seeing higher bills when it’s time to renew their insurance.

Key reasons for rising motor insurance rates

1. Higher repair costs

The cost of repairing vehicles has surged due to advances in automotive technology. Modern cars are equipped with sophisticated safety features, advanced electronics, and specialised materials that make them safer but also more expensive to repair. For instance, repairs involving sensors, cameras, or other high-tech components often require specialised equipment and skilled technicians.

In Singapore, repair costs have increased, with some parts like bumpers, windscreens, and electronic components costing much more than they did a few years ago. For newer car models, even minor collisions can lead to hefty repair bills, which insurers must cover. Consequently, these higher repair expenses contribute directly to rising insurance premiums.

2. Increased frequency and severity of claims

Insurance companies have reported a rise in both the frequency and severity of claims. In 2023, the motor insurance segment saw a 73.3% increase in net incurred claims, primarily due to a rise in road accidents and the higher costs associated with repairing advanced vehicle technologies.

Increased traffic congestion and distracted driving are also key factors behind the rise in claims.

3. Rising medical costs

Medical costs have been on the rise, and this trend extends to treatments related to road accidents. According to recent reports, medical inflation in Singapore is projected to rise, with estimates of around 9.8% for 2023. Factors like advanced medical procedures, a fast-ageing population, and an increase in chronic conditions affect these rising costs. As insurers bear the higher expenses of accident-related treatments, these costs are reflected in increased motor insurance premiums
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4. Inflation and economic factors

Inflation and economic factors are also pushing motor insurance costs higher. In Singapore, the rising cost of living affects everything, including repairs, medical bills, and administrative expenses. Global supply chain disruptions and part shortages add to the costs, which are then passed on to consumers.

Impact on vehicle owners

Rising motor insurance rates are adding financial pressure on vehicle owners. Are you finding it hard to keep up with growing premiums? Some drivers are even considering downgrading their coverage, but is that worth the legal and financial risk? For those on tight budgets, these extra costs can be challenging. Some vehicle owners are looking at switching insurers or adjusting their coverage to save money, but finding the right balance between cost and sufficient coverage is not always easy.

What can vehicle owners do?

1. Shop around for better rates

It makes sense to shop around and evaluate quotations from several insurance providers.This allows you to find the best rate that fits your needs. Many insurance companies in Singapore offer online tools that make comparing coverage options and premiums easy. Look for discounts, such as those for safe driving, bundling policies, or choosing a higher deductible. Taking the time to explore these options can help you save on your insurance premiums.

Pro tip: Leave a request here to compare motor insurance rates across more than 10 insurers

2. Adjust coverage options

Make sure your present policy meets your needs by reviewing it. For older vehicles, switching from comprehensive to third-party coverage can save money. For example, owners of 10-year-old cars often opt for third-party plans, which cover damages to others but not to their own car. This switch reduces premiums but comes with the trade-off of less protection. Thus, it’s essential to weigh these savings against the potential financial risk of having to cover your own repair costs in an accident.

3. Increase deductibles

Raising your deductible is a proven way to lower your insurance premiums because it reduces the insurer’s risk. For instance, increasing your deductible from $500 to $1,000 could save you 10-20% on your premium. However, this means you’ll need to cover more upfront costs in the event of a claim. Before opting for a higher deductible, assess your financial situation to ensure you can afford the out-of-pocket expenses if an accident occurs. It’s a good strategy for confident drivers who rarely make claims.

Motor insurance rates in Singapore are rising due to factors like higher repair costs, more frequent and severe claims, increased medical expenses, and economic pressures. These changes are making it challenging for vehicle owners to keep up with premiums. However, by staying informed and exploring your options, you can efficiently manage your insurance costs to help you make smarter choices and find the best solutions for your needs.

Read more: Main things to look out for when purchasing a motor insurance