Adopting what are called telematics devices by insurers and drivers should reduce motor accidents and lead to reduced motor premiums by 10 per cent or more over the next two years at AIG Singapore, according to the insurer.
A telematics device monitors driving habits like acceleration, braking and cornering, which in turn helps insurers better understand driving behaviour.
AIG Singapore's head of auto insurance, Mr Manik Bucha, said technological advances like this could reduce traffic accidents.
An AIG road safety survey last year found that 68 per cent of Singapore drivers would consider installing such a device if it meant lower car insurance premiums, while more than half believed telematics would improve their driving habits.
AIG said accidents are likely to increase, given an expected 20 per cent rise in the number of rental vehicles on the roads next year and an influx of younger drivers buying new cars.
Mr Bucha said: "Not only are drivers who use rental cars for commercial enterprise more likely to clock up higher mileage and spend more time behind the wheel, but many are young drivers who are almost twice as likely to have an accident, compared to the average driver.
"Both of these factors are expected to result in a higher frequency of road accidents."
The young drivers segment at AIG has recorded a 33 per cent rise in third-party property damage claims over the past 12 months, showing that these drivers are involved in more "at-fault" accidents.
However, the increasing use of telematics could improve driving behaviour and mitigate the expected spike in motor insurance claims, says AIG.
The insurer is releasing a telematics smartphone app early next year that will provide motorists real-time information on their driving, a score for each completed journey as well as driving tips.