UAE car owners, fleet operators feel pain of 'co-insurance' cost in motor policies
After motor insurance premium hikes, accident repair costs too pack a punch for owners
Dubai: It’s not just motor insurance premiums that are zooming higher in the UAE – even the co-payment percentage is likely to firm up further in accidents where the insured is at fault.
This has particularly impacted fleet and limousine service operators. “The insurance terms for accidents have been toughened where now there is a standard deduction of Dh2,000 - and a coinsurance payment of 15% where our driver was at fault when the accident happened,” said Asad Khan, CEO of Green Luxury Car Transport.
Other fleet operators also say that the co-payment insurance component is eating into their operating margins. “Auto parts and repair costs have risen significantly in the UAE in the last 3 years, which balloons the cost of getting any vehicle involved in an accident back on the ground,” said an insurer. “That immediately adds to the cost for the car or fleet owner on the co-insurance costs for that particular repair.”
The insurance terms for accidents have been toughened where now there is a standard deduction of Dh2,000.
What the insurer says is on the ball. The actual cost of owning and maintaining a vehicle has risen in the UAE over the last 3 years. And then, from mid-2023, motor insurance premiums started to soar from their lows during the Covid year or 2020 and 2021-22. By the start of this year, these premiums had shot up further, and then accelerated after the April rains.
Spread the risk
Co-insurance payments are about spreading the risks when an individual or business signs up with an insurer to provide coverage. For instance, UAE residents shell out a certain percentage of the bill each time they head to a hospital or clinic for consultation or in-patient treatment. This percentage could be 10-20% depending on the insurer.
What’s really starting to hurt vehicle or fleet owners is that motor insurance premiums have gone up significantly across the board, which has increased since the April rains in the UAE. Insurers are already talking about more premium hikes to come during 2025, as they try to compensate for some of the losses they got hit with on claims related to the April rain fallout.
“Co-insurance is not just charged to fleet clients,” said Avinash Babur, CEO of InsuranceMarket.ae. “For individual car owners, an 'excess' is typically charged in the event of an own-fault accident, a single-party accident, or a 'hit-and-run' situation where the responsible party is unknown.
Co-insurance and excess have been standard features in motor policies, as well as in other types of insurance, since the beginning.
“This excess is a set amount that the policyholder is required to pay out-of-pocket before the insurer covers the remaining claim amount. This excess is common in individual policies to share some of the financial responsibility with the insured in such scenarios.”
All of which adds to the pain when an insured car owner suffers an accident. “After paying the higher insurance premium in August for the renewal, I was involved in an accident in October,” said one vehicle owner. “That’s when I felt the full blast of the co-payment costs on car repair. I thought co-payment was only for medical insurance. Now, I am looking at another premium hike next year at renewal time”
According to Babur. “Co-insurance has always been part of motor insurance policies,” he said. “Co-insurance and excess have been standard features in motor policies, as well as in other types of insurance, since the beginning.
“These elements are fundamental to how policies manage risk and share financial responsibility between the insurer and the insured.”