Motorists unhappy even with competitive insurance premium rates

A sound underwriting and pricing need to interplay, says General Insurance Association of Singapore.

Here’s an excerpt from GIA President Derek Teo during the Annual General Meeting Luncheon as he spoke of two challenges confronting the insurance industry.

While competitive premium rates may benefit consumers, they are not sustainable if they are achieved without regard to sound underwriting and pricing.

Eventually, insurers will suffer losses which become too great to bear and some will exit the business, leaving consumers with fewer choices.

Those that remain will be forced to raise premium rates sharply, and complaints from unhappy motorists can be expected to follow.

Ultimately, this is detrimental to consumers and the insurance industry. We have seen this episode played out before in the domestic motor insurance market.

The challenge for the industry therefore is to take heed of the lessons learnt and maintain your underwriting and pricing discipline this time round.

It is in the interest of both consumers and insurers that all of you only pursue business strategies that are sustainable and not sacrifice prudence for potential short-term gains.

The second challenge for the industry that I would like to touch on is the need to keep pace with global regulatory reforms.

Much has been said and written about the weaknesses in regulations and business practices that caused the global financial crisis. The insurance business model enabled the majority of insurers to withstand the financial crisis better than other financial institutions.

Nevertheless, there are corporate governance, capital adequacy and risk management lessons from the crisis that are applicable to the insurance industry.