Should the Federal Traffic Council (FTC) decide to push ahead with plans to reduce the legal driving age in the UAE to 17, or even 16, insurance premiums could be hiked to compensate for the added risk of more inexperienced drivers on the road.
Premiums have decreased by 40 per cent over the past two years owing to increased competition, but any move by the FTC to allow young petrolheads on the roads could see that trend take a sharp U-turn.
“If the FTC decides to lower the driving age, it is likely that insurance premiums will go higher, especially given the fact that government authorities don’t interfere with the price levels of insurers,” Ahmad Hashim Behroozian, CEO of the Licensing Agency of the Dubai Roads and Transport Authority (RTA), tells GN Focus.
A tailored approach
Major General Mohammad Saif Al Zafein, Assistant Chief for Operations Affairs, Dubai Police, and Chairman, FTC, recently told Gulf News that the FTC has given the green signal to reduce the legal driving age in the UAE to 16 or 17. The proposal is under review with the Committee for Strategies and Policies at the Ministry of Interior.
Behroozian says the FTC — which includes two RTA representatives — is considering the role of insurance prices in its ongoing deliberations about lowering the legal driving age. The council may even look to offset base rate rises with recommendations of a more tailored approach to insurance coverage.
“A lot of countries relate their insurance prices to driver history and I think this is an important possibility for Dubai in particular,” says Behroozian.
“It’s the role of the government and transport authorities to provide insurers with data to identify the risk levels of a particular category of driver,” he adds. “And of course, it’s not always the case that the age of the driver is always related to the risk factor. Some older drivers have worse driving records than 18-year-olds. The FTC should consider the option of providing the insurance authorities with data to allow them to become more accurate in their estimations of driver risk.”
Statistics revealed by the Ministry of Interior late last year showed that almost half of all road accidents (41.8 per cent) in the UAE between 2009 and 2012 were caused by those aged 18 to 30 years.
Pricing strategy
At the tail end of 2013, the UAE Insurance Authority prepared a draft law to standardise car policies. It has been referred to the Federal Cabinet for approval. The law, if instated, would mean insurance premiums would be influenced by factors such as driver’s age, gender, the model and value of their car and, crucially, the policyholder’s driving record and accident history. Policies in the UAE are currently determined solely on the make and age of your car.
Alexis de Beauregard, Chief Officer, Marketing and Retail Product Offering, AXA Insurance, tells GN Focus that lowering the legal driving age of drivers in the UAE “will not change AXA’s overall pricing strategy”.
“Insurance is all about hedging against risks, and we already have a pricing
model in place for all types of drivers. If the legal age for driving licences is reduced, we will need to factor this in our pricing model to include this new customer segment. With our segmented tariff, safe drivers will always get very competitive prices and this new law won’t impact them. The decision would be based on conclusive statistics and risk evaluation.”
