Page 46 - Digital Edition SIRC Supplement

MARKET REPORT - SINGAPORE
Robust and ready for
regional integration
While the global economy is entering another phase of uncertainty, Singapore’s
general insurance industry is poised to continue strengthening and be ready for
ASEAN Economic Community, says Mr Derek Teo, Executive Director, General
Insurance Association of Singapore.
The global economy has entered another phase of
uncertainty and market volatility. Singapore, a
highly open and trade-reliant economy, is often
one of the first to feel and bear the impact of a global or
regional economic turmoil. This has already manifested in
the performance of the Singapore economy so far this year.
GDP contracted by 4.0% on a q-o-q seasonally-adjusted
annualised basis in the second quarter of 2015. Economists
expect full-year GDP growth to be slower than previously
forecast.
The general insurance industry is not insulated from the
vagaries of the market and a downturn in the economy. Demand
for non-compulsory product segments does take a beating when
economic activity slows down. But we have enough areas in
the Singapore general insurance market that can sustain our
business through uncertainty.
A major regional business and financial centre, we expect
demand for commercial and specialist insurance to continue.
As we have witnessed the past few years, the growing diversity
of Singapore’s businesses and their specialisations—and along
with it the types of risks they manage and need to protect
against—has spurred growth in our specialist lines of business.
Credit insurance, for example, saw a spike in premiums—
growing by 52% and 53.6% y-o-y in net earned premiums in
2014 and 2013 respectively—as the need for credit protection
increased.
On the personal insurance front, the sustained efforts of
the General Insurance Association of Singapore (GIA) to
bring about greater awareness of the need for personal general
insurance products, such as travel, personal accident and health, coverage increases, particularly for commercial and specialist
have borne some fruits. We have seen higher appreciation and
take-up rate of such products as we continue our campaign
to educate Singapore consumers of the need for proper and
adequate insurance coverage. Health insurance, for example,
continued to be the best performer among the major classes of
business in 2014, growing by 31% year-on-year in net earned
premiums.
Improving practices for a more robust business
Improving the practices of our member companies and the
efficiency of the way they do business—in distribution,
underwriting, data management, and claims handling—have
also helped bring down the cost of business to our insurers.
Among key areas, we continue to build on the success of
the Motor Claims Framework (MCF), which remains an
effective scheme that simplifies and speeds up motor claims.
We have embarked on a publicity campaign to encourage
motorists to use in-vehicle cameras and to submit video
footage of motor accidents as part of the accident reporting
process. Since the MCF’s implementation in 2008, the
number of motorists making reports within 24 hours of their
motor accidents has jumped to 80%.
We also welcomed the introduction in 2014 by the State
44 SIRC Supplement • November 2015 • www.asiainsurancereview.com
Courts of a Motor Accident Guide, which provides people a
ready reference when they are involved in a motor accident.
It encourages members of the public, motorists and insurers
to settle motor accident claims out of court, which we believe
will help our industry bring down the cost of claims processing
and settlement.
Thanks to initiatives like these, we have been seeing a
consistent decline in the number of reported motor accidents.
In 2014 alone, the number of reported accidents tracked by
the GIA Records Management Centre stood at 148,792, down
by 3.2% from 2013. For the past five-year period, this number
went down by 9.3% from 164,065 in 2010 to 148,792 in 2014.
A pivotal year for ASEAN region
Outside our domestic market, the growing economic integration
in the region, particularly in ASEAN, is a clear area of
opportunity for our industry. This is a pivotal year for the
Singapore economy and the rest of the ASEAN member states
as the region integrates into a single economic community.
Singapore, being a financial hub, is well positioned in the
provision of financial services, movement of capital, and
transfer of know-how and technology. The same holds true for
the Singapore general insurance industry.
While the region has gone through significant economic
developments, has seen rising affluence, and continues to
grow—with an aggregated GDP of US$2.4 trillion—the
developing status of many of its economies means it requires
the protection and guarantee of insurance products. Risk-taking
forms a key part of the development process of these economies
as companies and governments build businesses, industries, and
infrastructure. Accordingly, their need for general insurance
insurance.
The opportunity for insurers to step in and play a role in
the development of emerging ASEAN economies is further
highlighted by the fact that much of the region is prone to
and regularly experiences natural catastrophes. As these
catastrophes grow in severity and frequency, the need for
general insurers to fill the insurance gap will inevitably
increase.
This is one of the reasons the GIA, in coordination with
the Life Insurance Association and the Monetary Authority of
Singapore (MAS), has been working with our counterparts in
the region to promote the profile and use of general insurance
in economic growth. As the ASEAN Economic Community
(AEC) kicks off this year, we expect to help provide better
risk transfer mechanisms in the region through a borderless
insurance market in the region. The MAS has particularly
identified three areas where liberalisation under the AEC will
benefit our industry and ASEAN economies: 1) catastrophe
insurance; 2) marine, aviation and goods in international transit
(MAT) insurance; and 3) reinsurance and retrocession.
With an ASEAN Insurance Integration Framework already
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