New players in the Singapore insurance industry have seen unparalleled growth, an anomaly for insurance markets where large, domestic players typically squeeze out new entrants.
For example, two of the newest entries to Singapore’s insurance market have seen over 100% growth in the past year alone, compared to single digit growth of the major players, notes ValueChampion, a value comparison website for insurance, credit cards, and other consumer financial services. The market share of FWD and Budget Direct, both of which entered the market in 2016, have grown by 2,704% and 7,400% respectively.
New insurers in Singapore succeed more easily due to the market’s small scale and the comparatively larger size of foreign entrants, says ValueChampion Singapore research analyst Anastassia Evlanova.
Price competition
In Singapore, small, new entrants tend to provide the lowest premiums to consumers. Because price is the most typically utilised differentiation factor, these companies have been able to capture market share quite quickly. For example, FWD and Budget Direct have been offering some of the lowest premiums for most products. Both insurers offer motor insurance premiums that are 30-40% cheaper than average and FWD is usually one of the cheapest general insurers across multiple products like travel, maid and home insurance. On the other hand, Direct Asia tends to focus on offering benefits that are not typically seen with other insurers, such as unique travel or medical benefits.
Scale
One main reason why Singapore has seen so many new entrants in its insurance market is that Singapore’s insurance industry is relatively small on the global scale. Because of its size, large foreign players can enter the market with low prices, and stomach their losses as they gain shares from established local players. In other words, having much bigger, profitable businesses elsewhere makes losing money in Singapore for a few years an investment that is relatively easy to persevere through. Economies of scale are not nearly as difficult to achieve in a smaller market as they would be in markets like the US where major players companies are already massive.
For instance, while FWD is a small newcomer in Singapore, it is actually a fairly large corporation with operations in 6 other countries and over $30bn in assets. This makes it even bigger than the leading domestic insurer in Singapore, NTUC Income, which has S$37.7bn ($27.2bn) in assets. This means that FWD is large enough to compete even against the largest domestic players in Singapore. Similarly, Direct Asia and Budget Direct are both owned by larger conglomerates overseas, making it easier for them to compete aggressively on price in Singapore.
Underwriting profits
In addition, Singapore’s large insurance players are still able to sustain underwriting profits even during downturns in the industry. Consistent underwriting profits from the major players can imply that there still might be some room for insurance premiums to be lowered. A