Why Is My Car Insurance So High?

In Singapore, the cost of owning and driving a car can be significant, and car insurance premiums contribute substantially to these expenses. The motor insurance market is projected to experience continued growth, with a Compound Annual Growth Rate (CAGR) of 4.1% during 2024-29. This upward trend translates to higher costs for consumers, making it crucial to understand the factors influencing these premiums.

Understanding these factors will empower you to make informed decisions, potentially lower your costs, and ensure you have the right coverage for your needs.

Typical car insurance costs

Age

Age plays a significant role in determining car insurance premiums in Singapore. Younger drivers, particularly those under 25, often face higher premiums due to their relative inexperience on the road. These "newbies" tend to be less experienced handling their vehicles, which contributes to a higher risk profile from an insurer's perspective.

Conversely, some insurance policies may offer premium discounts to eligible policyholders with decades of driving experience, recognising their established safe driving history.

Average car insurance rates by age

Age is a significant factor in car insurance pricing. To understand how age generally influences premiums, it's helpful to consider typical trends.

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Marital status

Marital status can also be a factor influencing car insurance premiums in Singapore. Married individuals, especially those with dependents, might be perceived as more cautious drivers, potentially leading to slightly lower premiums. Insurers may consider the responsibility of having a family as a factor that promotes safer driving habits.

Education

While higher education can be a factor that contributes to lower premiums in some regions, its direct impact on car insurance premium calculations in Singapore is generally less significant. Insurers may consider education as one indicator of stability and responsibility, but on its own, it's typically not a major determining factor.

Address

Your residential address and where you typically park your car can influence your car insurance premium in Singapore. Urban areas with higher population density, increased traffic congestion, and a greater risk of accidents or theft may result in higher premiums. Similarly, certain regions with higher incidences of vehicle theft or vandalism may also see increased insurance costs. In essence, areas with higher rates of accidents or theft might result in higher premiums.

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Occupation

Occupation can also play a role in determining your car insurance premium rates in Singapore. Certain occupations that involve more time on the road or higher-risk driving activities may be associated with higher premiums. For example, occupations such as delivery drivers or sales representatives who spend a significant portion of their workdays driving may be considered higher risk compared to occupations with less frequent driving requirements, such as an office manager. The reasoning goes that the more time you spend on the road, the higher your chances of getting into an accident. Hence, some insurers charge a loading to account for this risk.

Driving history and No Claim Discount

Insurers in Singapore meticulously assess your driving record to gauge your risk profile, directly influencing your car insurance premiums. A clean driving history is highly valued, and if you've maintained a spotless record for the past three years, free of fines or demerit points issued by the Singapore Police Force, you may qualify for a Certificate of Merit (COM). This Certificate of Merit can unlock additional discounts on your premiums from participating insurance companies, on top of the No Claim Discount.

The No Claim Discount is another critical factor. It's a reward system where you accumulate discounts by avoiding accidents where you are more than 20% at fault. Drivers with a long history of safe driving can achieve significant NCDs, potentially reaching up to 50%. While NCD isn't the sole determinant of your premium, it plays a substantial role, and you can generally expect your premium to reflect your prevailing NCD level.

Maintaining a high NCD is one of the most effective ways to keep your car insurance costs down. Conversely, being found at fault in an accident will result in a 30% reduction of your NCD, which can translate to a considerable increase in your premiums. To mitigate this risk, consider insurers that offer NCD protection, preventing a reduction in your NCD even in at-fault accidents. If such complimentary protection isn't available, or if you're still building up your NCD, exploring the option of purchasing an NCD protector feature might be worthwhile.

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Driving experience

Insurers in Singapore consider driving experience as a factor in assessing risk. First-time drivers, or those with newly minted licenses, are generally perceived as higher risk due to their lack of experience and familiarity with road conditions and traffic situations. This translates to higher premiums compared to more seasoned drivers.

It's important to note the correlation with age; for instance, even older individuals who are new to driving may still face higher premiums initially. However, as you accumulate more years and hours behind the wheel, you can generally expect your premiums to gradually decrease, reflecting your growing expertise and reduced risk profile.

Recent claims history

As expected, insurers in Singapore carefully examine your past claims history to evaluate your driving habits and associated risk, which directly influences your premium. They place particular emphasis on the number of claims you've filed within the immediate past 3 years; this information is a standard inquiry on most car insurance application forms.

Unsurprisingly, if you've filed claims within the past 3 years, your premiums will likely increase. This practice might seem counterintuitive, as one might assume that experiencing an accident would make a driver more cautious. However, statistical evidence suggests that drivers who have filed a claim have a higher probability of filing another claim within a relatively short period. While it may appear unfair, this statistical trend is a key factor insurers use to assess risk and determine premiums.

Vehicle type

The make and model of your car significantly influence your car insurance premiums. Insurers in Singapore carefully consider these factors, often in conjunction with the car's engine capacity, to assess the potential cost of repairs and the likelihood of theft.

Here's a breakdown:

• Is your car a premium model or an SUV? Higher-end cars, particularly luxury or continental brands, and SUVs generally command higher insurance premiums. This is because their parts tend to be more expensive, leading to increased repair costs in case of damage.

• How powerful is your car? Cars with higher engine capacity are generally more expensive to insure. Insurers often correlate increased engine power with a higher propensity for speeding or more severe accidents, while less powerful cars are typically cheaper to insure.

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Vehicle age

The age of your vehicle also plays a role in determining your car insurance premiums in Singapore. Insurers consider the vehicle's registration date or even the manufacturing date to assess its age.

Here's how age can affect premiums:

• Some insurers may charge higher premiums on brand-new cars, primarily due to their higher market value and the potential cost of replacing them if totaled.

• Premiums may increase slightly as a car ages and parts become harder to source or more expensive to replace. However, this increase is often gradual, and premiums tend to stabilise or increase only very slightly once the car is past the 10-year threshold.

Vehicle trim level

The trim level of your car, indicating its features and specifications, can also affect your insurance premium. Higher trim levels often equate to a higher Original Market Value (OMV), which is used to calculate import duties and taxes. A higher OMV generally translates to higher repair costs, as these vehicles may have more advanced technology, specialised parts, or luxurious interiors. Insurers factor these potential repair costs into their premium calculations.

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Insurance company

Car insurance companies in Singapore employ diverse pricing models, meaning that premiums can vary significantly between providers. Each insurer assesses risk differently, leading to variations in the quotes they offer for the same driver and vehicle. Key insurance companies in Singapore include, but are not limited to, NTUC Income, Aviva, Etiqa, and AXA.

While some of these insurers may specialise in certain driver profiles or vehicle types, others may offer competitive rates across the board. Therefore, it's crucial to recognise that premiums are not uniform and that comparing rates from multiple insurers is essential to find the best car insurance option for you.

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Gaps in coverage

Lapsing your car insurance policy, even for a short period, can have negative consequences. When you reapply for coverage, insurers may view this gap in coverage as an increased risk, potentially leading to higher premiums. Maintaining continuous coverage demonstrates responsible behaviour and reduces the perception of risk in the eyes of insurers.

Coverage options

The type and extent of coverage you choose significantly impact your car insurance premium. Comprehensive coverage, which provides the most extensive protection against various risks, including accidents, theft, and natural disasters, is generally more expensive than basic third-party coverage. Third-party coverage only covers your liability for damage to other vehicles or injuries to other parties.

Add-ons to your policy, such as coverage for personal accident, medical expenses, or roadside assistance, will also increase the overall premium. It's crucial to carefully understand your coverage options and select a policy that adequately protects you without exceeding your budget.

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Deductible amount

The deductible, also known as the excess, is the amount you agree to pay out-of-pocket in the event of a claim. For example, if your policy has a deductible of S$500 and you file a claim for S$2,000 in damages, you'll pay the first S$500, and the insurer will cover the remaining S$1,500. Choosing a higher deductible can lower your car insurance premium, as you're assuming a greater portion of the risk. However, it's important to select a deductible amount that you can comfortably afford to pay in case of an accident.   

» MORE: Everything you need to know about No-Claims Discount (NCD)

Loyalty

While not always a significant factor, some insurers in Singapore may offer minor discounts or incentives upon car insurance policy renewal as a gesture of loyalty. This might include a small percentage off your premium or additional benefits.

However, these loyalty discounts are typically not substantial enough to outweigh the potential savings from switching to a more competitive policy. Therefore, it's always recommended to conduct a thorough comparison of available options, even when your current insurer offers a renewal discount. For example, some insurers may offer a discount for holding multiple policies (e.g., car insurance and home insurance) with the same company.

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Discounts

Several types of discounts can help you lower your car insurance premiums in Singapore. These include:

• No Claims Discount: As mentioned earlier, this is a significant discount that accumulates over time for each year you drive without making a claim.

• Multi-car discounts: Some insurers offer discounts if you insure multiple vehicles under the same policy.

• Bundling: You might also find discounts for bundling your car insurance with other insurance products, such as home or travel insurance.

It's important to actively seek out and inquire about all available discounts, as they can significantly reduce your overall insurance costs.

Increased expenses

Rising costs within the automotive and healthcare sectors in Singapore significantly impact insurance companies and contribute to the overall trend of higher car insurance premiums. Insurers face increased payouts due to the escalating expenses associated with repairing vehicles and covering medical claims resulting from accidents.

Here's a breakdown:

• Rising car repair costs: The cost of repairing vehicles in Singapore has been on the rise. This is driven by factors such as:

• Increased labor costs: The cost of skilled mechanics and technicians has increased.

• Higher parts costs: The price of car parts, especially for newer or luxury models, has also risen due to supply chain complexities and technological advancements in vehicle manufacturing.

• Rising healthcare costs: Medical fees and hospitalisation charges in Singapore continue to increase. This directly impacts the cost of settling injury claims, as insurers face larger medical bills for accident victims.

To offset these increased payouts, insurers in Singapore are often compelled to adjust their premium rates, leading to higher costs for car owners.

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Higher claims frequency

An increase in the frequency of car insurance claims also puts upward pressure on premiums. When insurers face larger payouts due to a higher number of accidents, they may raise premiums to maintain their financial stability.

There are indications of increasing car insurance claim frequency in Singapore, influenced by factors such as:

• Rising traffic accidents: Statistics may show an increase in traffic accidents, leading to more claims for vehicle damage and personal injuries. For instance, the number of fatal accidents due to speeding increased by 43.8%, from 32 cases in 2023 to 46 cases in 2024.

• Rising healthcare costs: As mentioned earlier, higher medical fees associated with accidents contribute to more expensive claims.

These trends in claim frequency and healthcare costs necessitate higher payouts by insurers, which often translates to increased car insurance premiums for policyholders in Singapore.

Finding ways to reduce your car insurance costs is a priority for many drivers in Singapore. Here are some actionable tips to help you save:

• Compare quotes from multiple insurers: Don't settle for the first quote you receive. Obtain quotes from various insurance providers to identify the most competitive rates for your specific needs and driver profile.

• Maintain a clean driving record: A spotless driving history, free of traffic violations and accidents, is one of the best ways to secure lower premiums.

• Maximise your NCD: Drive safely to accumulate your NCD, as it offers significant discounts on your premiums.

• Pay premiums annually: Paying your premiums annually instead of monthly can sometimes result in a discount.

• Revisit quotes after your driving record improves: If you've had past driving infractions, revisit insurance quotes as your record improves, as premiums may decrease.

• Reconsider the car you drive: Opting for a car with a lower OMV and safety features can lead to lower insurance costs.

» MORE: 15 ways to reduce car insurance costs in Singapore 2022

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