Pay the Right Premium

Are you paying the right premium for your Motor Insurance?

1. How much should you insure your motor vehicle? Do you need to include the COE and PARF? Are you over-paying for your motor insurance premium?
   
   
2. NTUC Income does not use the vehicle value to calculate the premium for motor insurance. Instead, our premium is based on the claim experience.
   
   
3. This is how it works. Suppose we insure 1,000 vehicles and pay $400,000 in claims each year. The average cost of claims is $400 per vehicle. Our premium should be the cost of claims plus a margin to cover our expenses.
   
   
4. In practice, we do not charge the same premium for all vehicles. Some models are cheaper to repair than others. Older vehicles also cost less to repair. Based on our database, we are able to calculate the average cost of claim for each model and age of vehicle.
   
   
5. We also find that the claim experience vary according to the owner. Drivers who are older, have more driving experience, or work in certain occupations have less accidents than others. They should enjoy lower premiums.
   
   
6. Our premium rate takes all of these factors into account. They reflect the risk fairly. Each insured person should pay a premium that reflect the risk and expected cost of claims.
   
   
7. From experience, we have found that the cost of claims have an insignificant relationship to the vehicle value. Most of the claims are for repairs to the vehicles and for injuries. Whether the vehicle value includes the COE or PARF does not affect the claims that have to be paid.
   
   
8. For this reason, NTUC Income has moved away from using the vehicle value to determine the premium since 1993. This avoid the hassle of arguing over the "correct" amount to insure the vehicle, and whether COE and PARF should be included.
   
   
9. If there is a total loss due to theft or severe damage, we will pay the full market value of the vehicle, inclusive of COE and PARF. This allows the owner to buy a similar vehicle from the market. This is the most convenient form of settlement to the owner, who does not have to make separate claims for these items from the Land Transport Authority (LTA).
   
   
10. As a matter of fact, the cost of the claims is the same to us, even if the owner choose not to claim the COE and PARF - as we are able to recover this sum from the LTA anyway. For policyholders who prefer to insure without the COE and PARF, we will offer a 3% reduction of premium. In this case, they will make their own claim for the COE and PARF, in the event of a total loss.
    
    
11. Ultimately, the premium rates depend on the ability of the insurer to control the cost of the repairs and other claims, and the expenses of running the business. NTUC Income has been working on these challenges continuously for the past years. This is the only way to bring down the cost for the consumers.
    
    
12. There will be cases where some insurers are prepared to offer lower premiums - even lower than our cost of claims and expenses. For such cases, we may lose some of these customers. This is unavoidable in a free market.
    
    
13. For policyholders who stay with NTUC Income, we will continue to work hard to keep our premiums low by controlling our claims, reducing our expenses, and improve our quality of service.