March 14, 2009
MOTOR PREMIUMS
TALK about contradictions.
Yesterday, the Forum page carried a reply from the General Insurance Association ('Too early to gauge new scheme's impact on motor claim costs') to a March 6 letter, 'Motor Claims Framework: Why no cut in premium?'
There was also a report yesterday, 'Motor insurance set to cost more'.
On the one hand, we have the executive director of the General Insurance Association saying nine months is too premature for the Motor Claims Framework to prove itself.
On the other, we have the Big Three insurers - NTUC Income, AIG and AXA - stating that they will subjugate Singaporean motorists to higher insurance premiums due to so-called record losses last year in insurance payouts.
Motoring insurance is a requirement, not an option.
With this in mind, it seems like an overtly oligopolistic move on the part of insurers to jack up premiums and make the motoring population suffer simply because the former do not have stringent checks and balances in place to drastically reduce the number of fraudulent claims.
To pay higher premiums each year for a car that grows older is simply laughable and downright absurd.
Why should the motoring public, who have had no claims against their insurance policies, be suffering at the expense of motor insurers' inadequacies?
Where there is money to be earned, there will be repeated attempts at fraud, especially given the economic downturn.
It is high time motor insurers quit whining and put their collective shoulders to the wheel to get more stringent checks and balances in place.
Make those who are at fault pay for their mistakes, not the rest of us.
Ranganathan Vivek
[Here is moral hazard at work. Because driving has the potential to cause great damage and loss, by law a driver is required to be insured against any damage or loss he might cause. With insurance, he effectively passes on the costs of his negligence or recklessness to a third party who has no control over his negligent or reckless behaviour. As such, is there any incentive for the driver to be less reckless? There is, but the incentives seems to be less than effective. In addition, the situation lends itself to fraudulent claims.
More stringent checks costs more money and delays in settling claims.
But yes. Motoring insurance is a requirement, not an option. However, motoring is an option.
Another way of looking at this is the "Tragedy of the Commons". In this case the insurance payouts is the commons. As long as claims are reasonable, the commons is not overdrawn and payouts can be funded from the premiums. However, if there is fraud, then the commons is overdrawn and depleted and everyone suffers.
That said, if there is no way to manage this, then insurance premiums will become another disincentive to own and operate a vehicle. ]
MOTOR PREMIUMS
TALK about contradictions.
Yesterday, the Forum page carried a reply from the General Insurance Association ('Too early to gauge new scheme's impact on motor claim costs') to a March 6 letter, 'Motor Claims Framework: Why no cut in premium?'
There was also a report yesterday, 'Motor insurance set to cost more'.
On the one hand, we have the executive director of the General Insurance Association saying nine months is too premature for the Motor Claims Framework to prove itself.
On the other, we have the Big Three insurers - NTUC Income, AIG and AXA - stating that they will subjugate Singaporean motorists to higher insurance premiums due to so-called record losses last year in insurance payouts.
Motoring insurance is a requirement, not an option.
With this in mind, it seems like an overtly oligopolistic move on the part of insurers to jack up premiums and make the motoring population suffer simply because the former do not have stringent checks and balances in place to drastically reduce the number of fraudulent claims.
To pay higher premiums each year for a car that grows older is simply laughable and downright absurd.
Why should the motoring public, who have had no claims against their insurance policies, be suffering at the expense of motor insurers' inadequacies?
Where there is money to be earned, there will be repeated attempts at fraud, especially given the economic downturn.
It is high time motor insurers quit whining and put their collective shoulders to the wheel to get more stringent checks and balances in place.
Make those who are at fault pay for their mistakes, not the rest of us.
Ranganathan Vivek
[Here is moral hazard at work. Because driving has the potential to cause great damage and loss, by law a driver is required to be insured against any damage or loss he might cause. With insurance, he effectively passes on the costs of his negligence or recklessness to a third party who has no control over his negligent or reckless behaviour. As such, is there any incentive for the driver to be less reckless? There is, but the incentives seems to be less than effective. In addition, the situation lends itself to fraudulent claims.
More stringent checks costs more money and delays in settling claims.
But yes. Motoring insurance is a requirement, not an option. However, motoring is an option.
Another way of looking at this is the "Tragedy of the Commons". In this case the insurance payouts is the commons. As long as claims are reasonable, the commons is not overdrawn and payouts can be funded from the premiums. However, if there is fraud, then the commons is overdrawn and depleted and everyone suffers.
That said, if there is no way to manage this, then insurance premiums will become another disincentive to own and operate a vehicle. ]
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