SINGAPORE - A new pay-as-you-drive insurance policy was launched on Wednesday (May 11) for private-hire car drivers operating under the GrabCar app.

The commercial motor insurance policy - called Pay-As-You-Grab - aims to encourage more part-timers to join the industry, by helping them overcome the hurdle of hefty commercial insurance, which can cost about $3,000 a year.

Commercial auto insurance for ferrying passengers is about 30 to 50 per cent more expensive than regular motor policies for private use.

The new product, designed by Grab and AXA Insurance Singapore, can help drivers save up to 30 per cent off their commercial auto insurance premiums, depending on the distance they clock for paid trips, both firms said.

Head of Grab Singapore Lim Kell Jay said: "Commrcial insurance will be more expensive than normal insurance, but it doesn't have to be prohibitive. We are making it more affordable for drivers who may be sitting on the sidelines."

Under the new policy, private-hire car drives pay a flat amount of 70 per cent of the base premium, and an extra 6 cents per kilometre driven, capping off at 100 per cent of the base premium.

Giving an example of a 40-year-old private-hire car driver who drives less than 10 hours a week - or 15 trips per week - AXA and Grab said that he would only have to pay $2,568 a year for this commercial auto policy, compared to $3,000.

While the policy covers all commercial trips for third-party liability, the deductible for an accident during a GrabCar ride $2,000, but for a non-GrabCar ride it is $5,000.