A closer look at why new entrants thrive in a small but dynamic market.
SINGAPORE: In most parts of the world, the insurance industry is dominated by long-standing giants with significant economies of scale, often leaving little room for new players. Yet, Singapore’s insurance market has proven to be a notable exception, with fresh entrants achieving remarkable growth alongside established players in recent years.
What is it about Singapore’s insurance landscape that allows newcomers to flourish? To answer this, we examined the key factors that distinguish Singapore’s market from other developed economies.
Key Insights
Global Scale: Singapore represents only 0.7% of the global insurance market, compared to South Korea’s 2.7% and the US’s 43.7% (2022).
Success of New Entrants: Smaller market size and supportive conditions enable newer insurers to compete effectively.
Disruption and Growth: Recent entrants like FWD and Budget Direct have gained traction with aggressive pricing and innovation, unlike the slowing growth seen in legacy players.
Economies of Scale: A Barrier in Other Markets
Globally, insurance markets are dominated by large players leveraging economies of scale. The fixed costs of running an insurance business—spanning administration, distribution, and underwriting—are significant, and larger firms spread these costs over broader customer bases, offering competitive pricing.
In the US, for example, the top three auto insurers control over 21% of the market and offer premiums up to 30% below the national average, making it difficult for smaller players to compete. Similarly, in South Korea, the top four domestic insurers account for nearly 69% of the market, with low premiums that foreign players struggle to match.
This high concentration, coupled with intense competition, forces smaller insurers in these markets to either operate at a loss or pivot toward niche strategies.
Singapore: A Playground for New Entrants
In contrast, Singapore’s smaller insurance market presents unique opportunities for growth. New players can capture market share quickly, leveraging aggressive pricing strategies without facing the scale of entrenched competition seen elsewhere.
Take FWD and Budget Direct, for instance. Both entered Singapore’s market in 2016 and rapidly gained ground by offering motor insurance premiums 30–40% cheaper than average. Their success stems from strategic backing by larger international entities, enabling them to absorb initial losses.
FWD: Operates across 10 countries with over S$83.9 billion in assets under management (2021).
Budget Direct: Supported by a global conglomerate, allowing it to compete on price and innovate with unique product benefits.
Why Newcomers Thrive in Singapore
Singapore’s insurance market benefits from its relatively small size and low entry barriers. Large foreign insurers can enter the market, offer highly competitive premiums, and sustain losses as an investment. In a smaller market, achieving economies of scale is less daunting compared to massive markets like the US.
The government has also liberalized the sector, encouraging foreign investment and competition since 2000. Additionally, even during downturns, Singapore’s major players like MSIG maintain underwriting profits, signaling room for further competition without destabilizing the market.
Consumer Impact and Future Trends
Intense competition benefits consumers by keeping premiums in check and spurring innovation. For example, FWD’s entry into the online insurance space has prompted others to follow suit, integrating digital solutions and fintech into their offerings.
Still, Singaporeans pay higher car insurance premiums (2–4% of annual salaries) than South Koreans (1.1%), suggesting that further price competition could emerge as the market evolves.
Looking Ahead
Singapore’s dynamic insurance market demonstrates that smaller markets can foster competitive and innovative ecosystems, offering valuable lessons for other regions. For consumers, this translates into greater choice, lower premiums, and enhanced services. As new players continue to disrupt the status quo, Singapore’s insurance industry is poised to remain a model of healthy competition and growth.
