Motor Insurance

I was helping my client to get a private motor insurance. As a first time car owner, he was quite new to the world of private motor insurance, and in the process of helping him get his motor insurance I shared with him a few insights which I thought might be useful to people who wants to know more about motor insurance.

A) The Type of Coverage:

Generally speaking, motor insurance comes in three basic types:

1) Third-Party only
(covers Act Liability -which means death/bodily damage to third-parties and/or passengers - plus damage to third-party's property)

2) Third-Party, Fire and Theft
(Covers (1) and loss/damage to own vehicle due to fire or theft)

3) Comprehensive
(Covers (1) and (2) and damage to the insured's vehicle plus some other additional benefits like towing etc)


Strictly speaking, although the basic requirement in Singapore is the Third-Party only, clients usually get the comprehensive coverage because the coverage is the broadest and it is the only one that covers damage to the insured's own car.

B) Excess

It is a stipulated first part of any claim amount that the insurer will NOT pay. For instance if the excess is $500, then it means that the insurer will not pay for the initial $500 of the claim. If the excess is $1500, then the insurer will only pay if the claim is greater than $1500. The thing to note is the lower the excess, the higher the premium (i.e. for plans with $0 excess, the premiums are the highest)

Also, there is an excess for young drivers (i.e. drivers whose driving license/experience is less than 2 years old). My client received a quotation from another agent whom quoted him $1,100 based on a 3 years driving experience. When my client corrected it to 2 years, the quotation shot up to $1,800. Other than that, unnamed driver can also incur higher excess.

C) No Claim Discount (NDC)

The NDC is a financial incentive for the insured for not making any claims under the policy. So as a new driver my client is not entitled to the NCD in the 1st year. He will start accumulating the NCD after the 1st year (i.e. in the 2nd year) which he will get 10%. In the the 3rd year, the NCD will be 20% and in the 4th year 30% and so on till he hits 50% in the 6th year, which is the maximum.

So my client was asking how come the quotes he received are so high, and I explained that the reason is because he does not have any NCD. He will have to wait till the 3rd year onwards to get 20% off. But the thing is this, once he makes a claim the NDC will be reduced as well, unless he insured the NDC itself at an additional cost.

D) Driver Characteristics

These characteristics will affect the quotation:

1) Age and gender (young and older drivers will get higher permiums)
2) Driving experience (less than 2 years will have higher premiums or even be declined)
3) Occupation (certain occupations like reporters will be declined)
4) Claims experience (will be declined or charged a higher premium)

The most amazing thing I found out is when he showed me a quote from another agent. Apparently the agent gave him two different quotes based on his marital status! The quote for "married" is $1,300+ while the quote for "single" is $1,500. Perhaps 'singles' are more likely to get into a accident because they are more 'care-free' and therefore 'care-less'???




All in all, as I was helping my client source for quotations, he was also going to other agents to get quotes, so in the end he managed to get a variety of quotations to choose from. The important thing to note is that the premiums for motor insurance can vary vastly simply because there are so many possible permuations. For instance the permium can be lowered just by quoting a 'Third-Party' only coverage instead of the 'Comprehensive' coverage. The agents could also choose a higher excess so as to give a more competitive price. Lastly the policy might only allow the insured to go to the 'authorised' workshops for repairs rather than any workshop. So in esscence, price is NOT everything for motor insurance, you have to see what is the VALUE to the price.




Finally, be aware of dubious quotes. If it is too good to be true, then usually it IS too good to be true. If you are comparing between quotes always check that you are comparing between apples and apples. Lastly, resist any urge to manipulate the categories. Don't claim that you are married even when you are single just to get a lower premium. When in times of claim, any initial discrepany can render the policy void from inception.