What You Need to Know About Excess (Underwriting) - Part 4

By now, you would have acquired a good basic understanding of excess. But, do you know that other than Eldery Young & Inexperienced Driver (EYIDR), you might also experience a higher excess loaded by the insurer? I have listed a few examples below for your reference.

1. Endorsed driving license

It could be due to speed driving, hit and run, drink driving etc. Well, if you have your driving license revoked / suspended recently, it will affect your insurance premium and excess. The insurer will usually look at the duration of revoke, when it was revoked, alochol level, frequency, accident details, occupation etc to underwrite your proposal. If they do take in your case, you should expect a certain loading on your premium and excess accordingly.

2. High claim experience

In Singapore, you are required to declare any claim experience you have registered in the last 3 years. Let's assume you had a bad chain collision accident recently and being the last car of the accident, the liability is down on you. The total claim experience came up to $50,000. What will happen to your renewal? Well, if the insurer takes in your case, you might experience a loading on your excess, not to mention premium as well. The level of increase is dependable on the claim experience, no claim disount level before the accident(s), frequency of accidents, loyalty with insurer etc.

3. Frequency of accident

You might not have high claim experience in the last 3 years (E.g.1 at fault claim of $50,000) but you could have encountered 2 or more at fault claim with claim experience of say $10,000 in total. In such case, the insurer may also increase your excess due to high frequency of accidents. You might question the rationale behind this when the claim experience is much lower than the previous example. The answer is very simple. Higher frequency of accident means more claims of own damage and from Third Parties. You might have a low claim experience of $10,000 today but that doesn't mean you will always have a low claim experience. The next accident could be a fatal accident which can cost the insurer hundred of thousands, especially since it involves bodily injury.

What You Need to Know About Excess (Premium) - Part 3

Let us move on to see how excess is related to premium.

Let's assume that you have a normal saloon car (Toyota Vios) and based on your profile, your motor policy premium is at $1000 with standard excess of $500. As mentioned earlier, if you happen to have a minor accident with cost of repairs < $500, it is pointless to claim against your policy for the repairs. As such, insurer actually protect themselves from small claims by setting a standard excess on the policy.

Thus, the higher the standard excess, it also means a lower risk for the insurer. In that earlier example, if the standard excess is at $1500 instead of $500, the premium should be lower than $1000, say $950. Likewise, if the standard excess is set at $0, the premium will be higher than $1000 since it means a higher risk for the insurer to incur losses.

In practice, most insurer will alow the insured to buy up or buy down excess which is also commonly known as voluntary excess. However, there will be a limit on how much excess you can buy up and in Singapore context, it is usually set at $3000.

On the other hand, if you would like to buy down excess, there may be some conditions attached. For example, the insurer may only allow the insured to buy down excess provided there is no claim or 1 claim < $10,000. This is only an example and it differs among all insurers. There could be more criterias which are not listed here.

One important point to note is any additional excess imposed by the insurer is usually not allowed for buydown. So, if the standard excess is $500 but due to your driving experience, your insurer has increased the excess to $1500, you will not be able to buy down the excess at all.

What You Need to Know About Excess (Advanced) - Part 2

I'm going to talk a little bit more on excess that you'd need to pay in the event of an accident first before we move on to see how it relates to your premium.

After all, a lot of us might not be aware of the possibly additional excess imposed by the insurer on the policy which is usually reflected somewhere clearly in the terms & conditions. I have listed down a few common ones for your reference.



1. Unnamed driver compulsory excess

Some insurers impose an additional excess in the event that the driver of the accident is not named under the policy. The rationale is very simple; if the driver is not named, the risk uncertainty is higher and the premium collected might not be sufficient in the first place.

2. Elderly, Young and Inexperienced Driver (EYIDR)

It is not uncommon for insurers to charge additional excess for drivers that fall under EYIDR category. The criteria of EYIDR differs among insurers but that's beside the point. The idea is insurers practice it and as insured, you have to refer to your terms & conditions in order to protect your interest. As a guide, the criteria might be anyone who is less than age 26, anyone who is more than age 65, and/or anyone who has less than 1 year of driving experience.

3. Third party excess

This is very rare and insurers seldom practise this. Third Party excess simply means that in the event of an accident, if there is any Third Party claim against your policy, you (as the insured) will need to pay the Third Party Excess. Of course, if you are claiming against your own damage, you will also need to pay your own damage excess. In the end, you will need to pay for 2 types of excess. Wow! So, why will insurer impose such a term? It is usually for abnormal or not preferred risk and in order to protect their own interests, the insurer might consider this option before they agree to underwrite the risk.

What You Need to Know About Excess (Basic) - Part 1

Are you a first time car owner? Do you know what you need to pay in the event of an accident?

If you are a first time proud owner of a car, you will probably have seen the certificate of insurance from your insurer already. You might not have noticed in the certificate or might not even be aware of this term that appeared as Excess. Some people like to call it "Deductible" instead. So, what is it?

I'll like to define it as the minimum amount that you have to pay before the insurer proceed to settle your claim. Another definition is also available at thefreedictionary.

Let me give an illustration. For example, right under your certificate, the standard excess is stated as $500.00. Thus, in the event that you met a minor accident and need to submit your damaged vehicle for repair and assuming that the cost of repairs is $2000.00, your insurer will only pay $1500.00 ($2000.00 - $500.00) for the cost of repairs. The balance of $500.00 is the amount you have to bear.

So, what if the cost of repairs is lesser than the excess stated in my certificate? In such cases, there is no incentive for you to pursue a claim with your insurer anymore. You may consider settling the claim on your own with your preferred workshop in order not to affect the No claim discount on your policy.

Thus, if you are getting a new car soon and checking out on the rates, you may also wish to take a closer look at the excess imposed. Do not be surprised if it differs among insurers since it is tied to the premium.

Last, but not the least, if you are interested to know more about excess and how it relates to your premium, keep a lookout for it as I will talk more on this soon!