21 Dec 2020
Posted in Insurance
Singapore’s general insurance market to contract in 2020 due to COVID-19, says GlobalData
Singapore’s general insurance market is forecast to contract by 1.9% in 2020, compared to the 6.7% growth registered in 2019, according to GlobalData, a leading data and analytics company.
GlobalData has revised Singapore’s general insurance forecast in the aftermath of COVID-19 outbreak. As per the latest data, Singapore’s general insurance business is forecasted to grow at a compound annual growth rate (CAGR) of 1.7% during 2019-2023 against the 2.5% growth as per pre-COVID-19 estimates, primarily due to the economic uncertainty following the pandemic.
Sangharsan Biswas, Insurance Analyst at GlobalData, comments: “According to the Singapore’s Ministry of Trade and Industry, the economy is expected to contract by 6-6.5% in 2020. Consumer spending has declined by 14% year-on-year during January to August 2020, which will lead to a decline in premium for general insurers.”
The impact of the COVID-19 was most prominent in motor and property insurance business lines, which together accounted for 42.0% of general insurance premium in 2019. According to the Department of Statistics of Singapore, the wholesale car sales witnessed a 31.8% decline year-on-year in the third quarter of 2020. Sales of motor vehicles increased by 7.5% in October 2020, reflecting an improvement in consumer demand, which is expected to support the growth in motor insurers premium in the short-term.
A similar impact is visible in the property insurance business. According to the Ministry of Trade and Industry, construction sector declined by 46.6% year-on-year in the third quarter of 2020, due to the closure of business operations and weak investment environment. As of August 2020, reopening of construction activities by the government while upholding health and safety standards by introducing periodic testing is expected to improve investor confidence and support property demand.
Personal accident and health (PA&H) insurance, which accounted for one-third of general insurance business in 2019, is expected to witness an increase in 2020 backed by rise in awareness for health insurance products. This is expected to partially insulate the decline in other business lines. Changes in policies such as the inclusion of hospitalization and death benefits and teleconsultation costs for policyholders impacted by COVID-19 are expected to further supplement the sales of personal accident and health insurance.
Mr Biswas concludes: “Despite controlling the outbreak, the economic recovery in Singapore is expected to remain subdued. Re-imposition of lockdown restrictions due to periodic resurgence of the virus could limit the growth potential of the general insurance business in the near term.”