The Myths of Motor Insurance

There are so many kinds of insurance in the market, life insurance, general insurance etc and motor is the most common and widely purchased insurance.

At this space-age century, people are getting more “Tech-Savvy” and most information is widely available on the Internet, be it cheap restaurants, car reviews, wedding venues etc… people will be able to do their research on the answers they are looking for.

And it’s by law that all motor vehicle owners to have a valid insurance when they are using their vehicles, and the ironical part about many car owners, with or without consciousness, will get a higher end motor insurance (of cause of a higher premium) to protect their vehicle, rather than themselves. My question is, if there is no law governing this, I guess no car owners will spend the money to purchase motor insurance.

Here are some benefits of having a motor insurance:

  • Cover repair cost when a accident occurs
  • Hospitalization benefits
  • Courtesy/ replacement car
  • Tow services and the list goes on….

(above-mentioned benefits, motor & travel insurance may vary on the type of benefits a customer chooses)

So what will be the common misunderstandings one may have of getting a motor insurance?

Myth 1:

“I buy motor insurance online is cheaper! I don’t have to pay the middleman fee!”

False! Premiums are derived from:

  1. Claims experience mainly
  2. Car brands
  3. Type of car
  4. Driver’s experience/ age
  5. CC
  6. NCD % (no claim discount)
  7. Excess

The benefit of getting from a broker/ agent, they SAVE all your ‘troubles’, help you with the claims when you are feeling down. On the other hand, if you get it online, you will have to do all the claims by yourselves, liaise with insurance companies etc, when you are not in the best of mood.

I was involved in a chain collusion on SLE towards city about 10 years ago, my car and I was ‘badly injured’, I was really glad that my agent helped me with everything!

Myth 2:

“Brokers will find the more expensive quotes as they want to earn more commission!”

Unlikely! As I have mentioned there are many “tech-savvy” customers, they will be able to get the pricings online if the price is way too much difference from the other companies. Customer should be able to tell that difference in the quotes and pricing.

It is really very competitive especially for motor insurance in terms of benefits v.s. premiums. Also, premiums are strongly regulated in Singapore, companies wouldn’t be able to charge too much. If it is too expensive, there will be no customer buying from such company and the company is losing the business sooner. No companies would want that to happen.

Thus, premiums will be the same be it you get from online or through a broker/ agent, as this is a competitive market in Singapore, every company is trying to cut the premiums to attract new customers.

The reverse will be true that all agents and broker companies will go bankrupt IF online quotes are cheaper. And what will be the reason for the surviving companies that don’t use online systems/ quotes?

Myth 3:

“Commercials are telling us getting online SAVE US a lot of money!!!”

False! There is a min profit margin a company must earn to sustain their business for many years to come, and costs and inflation have been going up, how could the premiums become cheaper? Premiums are derived from claims experiences, and payments for repairs and damages come from the pool of premiums paid, and we are talking about min of 5 figures each accident, so how cheap a motor insurance can go? It certainly makes no sense to do so in losing the business.

I personally will recommend to have someone in the profession to help me with all these, to save me from all the troubles, time and frustrations that I may encounter during claims.