Why is Singapore's Insurance Industry So Competitive?

Singapore's newest players in the insurance industry have seen unparalleled growth in the past few years, an anomaly for insurance markets where large, domestic players typically squeeze out new entrants.
Why is Singapore's Insurance Industry So Competitive?

The insurance industry around the world has been traditionally dominated by older and larger companies, with little to no new players that have been able to grow successfully. However, Singapore somehow has seen a number of new entrants successfully grow their presence in the past few years. What is it about Singapore that creates such a great environment for newcomers and foreign insurers to succeed? To better understand this anomaly, we analysed what makes Singapore's insurance market so unique compared to insurance sectors of other developed markets.

Summary Points

  • Singapore only makes up 0.34% of the world's insurance market, compared to one of Asia's largest players, Korea (3.4%) and the world's biggest player, the US (36.9%).
  • New insurers in Singapore succeed easier due to its smaller market and the comparatively larger size of foreign entrants.
  • 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.

Dominance of Economies of Scale in Insurance Industry Around the World

Insurance is typically dominated by large players with large scale. Because insurance products are typically very similar and can be easily copied, underwriters compete mainly through price. Under this dynamic, larger companies that are already established in the market usually find it easier to maintain low prices while still making a profit by spreading out their fixed costs over their large customer base, whereas smaller companies struggle to grow under the threats of diseconomies of scale and getting priced out. This relationship is best illustrated with the insurance markets in the United States and Korea, where the biggest insurers have the lowest premiums, making it difficult for new companies to compete and gain significant market share.

For instance, the US insurance market is a massive trillion dollar market with almost 6,000 insurance companies operating as of 2017. However, the top 10 non-life insurance companies control 47% of the market, with the top 3 taking up 21.3% of the market share. In other words, a mere 0.17% of the insurance industry controls almost half of the entire insurance market. Part of this reason is because their massive profits can help them offer rock-bottom prices that are hard to compete against. For example, in the US car insurance space, we see that the three biggest players offer some of the lowest premiums. In particular, Geico, one of the largest insurers controlling 13% of the auto insurance market, offers the 2nd cheapest premiums—30% below the nation's average.

This graph shows the average cost of auto insurance in the USA

South Korea, the second largest insurance market in Asia, is slightly different but operates similarly to the United States. There were 31 non-life insurers as of 2017 in the country. Among these, top 4 domestic insurers controlled 68.8% of the market. Similar to the US, these large domestic players also typically provide the lowest premiums. For instance, the three major car insurance players, Samsung Fire & Marine, DB Insurance and KB Insurance, control 64% of the market yet offer premiums that were 8%-15% below the market average. Furthermore, they all differentiate to entice different demographics, making it difficult for a foreign company to attract uncaptured markets. This is evidenced by the fact that the market share of foreign companies has stayed at around 2% for the past few years.

This graph shows the average cost of auto insurance in Korea, with the top 3 players in the insurance market offering consistently lower premiums on average

So why does this happen? Because insurance products can be easily copied and insurance companies mainly compete through price, their profit margins are limited. However, fixed costs of running an insurance operation doesn't vary much for established players or for new entrants. Therefore, large insurers can spread out their fixed costs, advertising budget and distribution channels more effectively than smaller players, thereby still making a profit while offering low prices. In other words, new entrants would have to suffer massive amounts of losses for a very long time before seeing any traction in the market.

Singapore Has Seen New Entrants Succeed Alongside Established Players

In contrast, Singapore's insurance industry shows a very different situation: 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 are 2 companies that have come into Singapore's insurance market in 2016, and they 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.

And due to their prices, their growth in the insurance space has been unprecedented. While FWD and Budget Direct's market share in motor insurance—Singapore's largest non-life insurance market—is still quite small, they have increased their market share by 2,704% and 7,400% since inception, respectively. Furthermore, FWD and Budget Direct both grew their direct business by 123% in 2018. In contrast, the top motor insurance's players saw much slower growth in 2018, ranging between 1% and 7%. AXA actually saw a 5% decline in their gross premiums in the same time period.

Gross Premium Growth of Motor Insurance of Largest Players vs. New Players

Insurer20172018% Change in 2018
Established Players
NTUC IncomeS$236,342,217S$238,125,1691%
AIG Asia PacificS$186,863,174S$203,943,6619%
New Players
Auto & General Insurance (Budget Direct)S$2,177,912S$4,851,324123%
Direct AsiaS$18,772,113S$22,783,83921%
*Total gross premiums of direct business done in Singapore

How Are These New Players Able to Survive Despite Low Prices and Large Losses?

So what is so unique about Singapore's insurance market? Simply put, we believe one of the main reasons 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.

This graph shows the relative size of Singapore's insurance market compared to select countries around the world, including the USA which makes up roughly ⅓ of the global market

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 US$30 billion in assets (S$39.64 Bn). This makes it even bigger than the leading domestic insurer in Singapore, NTUC Income, which has S$37.7 billion dollars 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.

Why Does Competition in the Insurance Sector Matter?

Competition in insurance is important in providing competitive premiums and quality service. An insurance industry with only a few players controlling the market can lead to expensive premiums and a lack of choice for the consumer, resulting in consumers overpaying for lower-quality products. However, a lot of competition means that insurers have to differentiate themselves via quality, innovation or price. For instance, as FWD launched its online insurance services, other insurers started launching online services as well, changing the landscape of traditional insurance. Some even started implementing FinTech to keep up with global changes in the insurance sector.

What's good about the current Singapore insurance market is that there is still room for more competition in Singapore. This is evidenced in two ways. First, the Monetary Authority of Singapore liberalised the insurance sector in 2000, with the goal of encouraging foreign investment and increasing competition. Second, Singapore's large insurance players are still able to sustain underwriting profits even during downturns in the industry. We see an example of this in 2017, where the top motor insurers saw a combined S$6.7 million dollar underwriting profit while the motor insurance industry as a whole saw a S$27.2 million underwriting loss.

Consistent underwriting profits from the major players can imply that there still might be some room for insurance premiums to come down. In the case of Korea, most insurance companies suffer an underwriting loss due to competition, and make up for the loss through investment gains. In fact, we found that Korean drivers pay some of the lowest car insurance premiums compared to other nations, spending only 1.1% of their annual salary on premiums. Comparatively, Singaporean drivers spend between 2%-4% of their annual salary on car insurance. However, it is important to note that insurers also consider their market's risk profile. This means while Singaporean insurers may be able to theoretically decrease their premiums and still make a profit through investment gains, they may feel like Singaporean drivers are riskier to insure while cars in Singapore are pricey, which will keep premiums at the current rate.

Total Underwriting Loss/Gain of Singaporean vs. Korean Insurers (2018)

InsurersUnderwriting Loss/Profit
Top 3 Korean Insurers
Samsung Fire & Marine-S$698,226,130
Hyundai Fire & Marine-S$649,380,900
DB Insurance-S$373,082,360
Top 3 Singaporean Insurers
NTUC IncomeS$8,298,714


To get our findings, we analysed the financial returns published by the Monetary Authority of Singapore of all the insurers in Singapore and analysed their direct premiums, gross premiums and underwriting results for 2016, 2017 and 2018, as well as industry data published by the General Insurance Agency. This helped us understand which insurer has the most market share and how quickly new players are growing.

We then compared this to other global insurance markets, primarily the US and Korea, to understand why the differences in competition were so great. We gathered financial data on the biggest players in these markets from their public filings, as most of them are publicly listed. We also gathered actual premiums of auto insurance policies in these countries to analyse price competitiveness of each players in their respective markets. While we looked at the insurance industry as a whole, we focused on motor insurance because information for it was most readily available for the majority of the insurers. It is also the largest insurance segment in Singapore, making it a good way to illustrate our analysis.

Anastassia Evlanova

Anastassia is a Senior Research Analyst at ValueChampion Singapore, evaluating insurance products for consumers based on quantitative and qualitative financial analysis. She holds degrees in Economics and International Business Management and her prior working experience includes work in the capital markets sector. Her analyses surrounding insurance, healthcare, international affairs and personal finance has been featured on AsiaOne, Business Insider, DW, Vice, Her World, Asia Insurance Review, the Australian Institute of International Affairs and more.