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AIG Market Update: Surge In The Shared Economy To Impact Auto Insurance in 2017

Date Published 07.12.2016
Topic Press Releases

AIG Market Update: Surge In The Shared Economy To Impact Auto Insurance in 2017

SINGAPORE, December 7, 2016 – The explosion of the sharing economy is expected to result in a 20 per cent rise in the number of rental vehicles on Singapore roads in 2017, according to AIG Asia Pacific Insurance Ptd. Ltd. (‘AIG Singapore’).

This continued growth in the rental vehicle market, along with the increasing use of telematics to improve driving behaviour and an influx of younger drivers buying new cars, will be the top three drivers of the auto insurance industry in 2017.

AIG Singapore’s Head of Auto Insurance, Manik Bucha, said the arrival of international transport players such as Uber and Grab, and homegrown car-sharing enterprises including iCarsClub and Smove, are increasing the exposure for Singapore road users and impacting the way insurers underwrite risk.

“Not only are drivers who use rental cars for commercial enterprise more likely to clock up higher mileage and spend more time behind the wheel, but many are young drivers who are almost twice as likely to have an accident compared to the average driver."

“Both of these factors are expected to result in a higher frequency of road accidents,” Mr Bucha added.

However, technology advances in the insurance industry also have the potential to reduce traffic accidents, with more insurers adopting telematics to promote safe driving. A telematics device monitors driving habits, such as acceleration, breaking and cornering, which in turn helps people to better understand their driving behaviour.

AIG’s road safety survey in 2015 found that 68 per cent of Singapore drivers would consider installing a telematics device to pay lower car insurance premiums, while more than half of drivers believe telematics would change their driving habits for the better.

Mr Bucha said, “We expect that the growing adoption of telematics devices by both insurers and drivers will reduce road risks and improve community safety, and eventually lead to a 10 per cent or greater decrease in auto insurance premiums over the next two years."

“AIG Singapore is targeting to release a telematics smartphone app early next year, which will provide motorists real-time information on their driving, a score for each completed journey, as well as driving tips. This will be complemented with rewards and challenges to promote safer driving behaviour,” added Mr Bucha.

The third trend that will impact the auto insurance industry next year is the growing number of younger drivers buying new cars. This segment has already experienced  a 33 per cent rise in third party property damage claims in the past 12 months, showing that young drivers are involved in more ‘at-fault’ accidents.

This is supported by AIG Singapore’s road safety survey which found that younger drivers are more likely to exhibit dangerous behaviour on the road compared to older drivers. For example, they are more likely to text, surf the Internet, call someone on their mobile phone or check their GPS when stuck at the traffic lights.

“The insight that some younger drivers are flouting the road rules which is leading to a rise in car accidents, shows that we need to ramp up our efforts to educate Singaporeans on road safety and incentivise them to be safer drivers."

“While we seize the opportunities and benefits that the sharing economy brings, such as providing people with access to a greater range of transport options and an alternative means of income, we need to keep an eye on the possible rise in associated risks and ensure that the roads remain safe for all,” said Mr Bucha.