As insurance premiums are hiked repeatedly, the insurance industry frequently trots out figures to show that it has been chalking up losses to justify the price hikes. The underlying assumption is simple; insurers are businesses accountable to shareholders and are under no obligation to subsidize the driving costs of Singaporeans. Fair enough?
Perhaps not so.
It must remembered that unlike most other insurance products, motor vehicle insurance is mandatory. It is mandatory as a matter of social policy. The powers that be do not want a situation where drivers cause damage to lives and property but are unable to compensate the victims for the losses incurred. It is fine and dandy to take your own risks, but not for innocent victims to do so. That is why third party insurance is acceptable.
And herein lies the great difference, motor vehicle insurance is a matter of providing a social benefit. When we look at all other forms of mandatory insurance in Singapore, we can see that insurers charge a low and competitive premium. So why not for motor vehicle insurance?
Now, the next line of argument that the insurers might bring up would be that the social policy is a matter determined by the state and they, as private entities, can voluntarily decide when they wish to toe the government's line. Fair enough?
Once again; perhaps not so.
Ultimately, corporations owe their birth and right to do business to the state. The state grants these corporations limited liability; it grants these insurance companies the right to be involved in insurance. What the state gives, it can take away. It is not an entitlement that they are allowed to run their billion dollar empires.
With this in mind, it is of course unrealistic to expect an industry used to cushy profits to suddenly become social minded. The best way to deal with this problem is for the government to step in. And I don't mean pushing the insurers to keep insurance affordable.
I mean a true overhaul of the system - make motor vehicle insurance voluntary and set up a simple claims framework for victims to put up a quick claim (like the small claims tribunal). No lawyers, no insurers. If you are insured, your insurer will simply pay on your behalf after the determination of liability is made. If you are not insured, the victim has the full gamut of court enforcement against you and your property. If that is insufficient, the remainder will come from the assurance fund. This assurance fund will be funded by part of COE takings. In return, COE will be adjusted so there is a minimum bid of $X where $X represents the flat fee that every new car buyer should put into the assurance fund. No more feeding the insurers unless you want to. No more bearing the increase from reckless drivers and inflated claims unless you want to.