Dubai: Car owners in the UAE will be getting some respite on their motor insurance premiums in 2024 – they will not be looking at a further 10-15 per cent rise as they did this year.
Instead, policy renewals will likely see ‘minor’ increases. This will certainly be helpful for all those new car owners coming out of the 1-year free insurance provided by the dealerships they bought from. (Some UAE dealers are also starting to offer multi-year insurance coverage, but these are limited to certain makes or models.)
But after the ‘policy shock’ they received in 2023, car owners should be more than OK with a slight increase in renewal rates. Provided they didn’t have any major claims in the preceding 12 months.
"Typically, a policyholder with a medium- to high claims record will see an increase in premiums,” said Avinash Babur, CEO of InsuranceMarket.ae. “While tailored to the individual’s record, it can range from 15-25 per cent, reflecting the risk for the insurer and ensuring we continue to offer robust coverage."
Battery or fuel don’t matter
The 2023 increase extended to all models and types of makes. It didn’t matter whether the vehicle was powered by internal combustion engine or had a battery doing all the work.
Despite the increases in 2023, the average car insurance premiums in the UAE are still considerably below pre-pandemic levels
For instance, a top of the range Tesla owner would have the average premium rise from Dh3475 to Dh4016.39, ‘in itself indicative of the broader trend’ on motor insurance, said Babur.
Some car owners will be paying more
While those car owners with a good track record will benefit from the stabilising in rate increases, for one category of residents, this may not be the case. That is, for new residents in the UAE with new cars, whose 1-year dealership coverage is coming to an end.
"They could experience higher premiums due to the lack of a localized driving and claims history,” said Babur. “It's a standard approach to mitigate the risk associated with new insured profiles, but typically stabilizes over time with a clear driving record."
Clearly, it’s all about claims.
“2023 has been a tough year in terms of profitability (for insurers),” said Franck Heimburger, who is the Chief Personal Lines Officer at GIG Gulf.
“The main factors that led to this situation is the increased traffic, resulting in higher claims frequency, inflation in repair costs, and those claims from incidents brought about by heavy rains and flooding.”
Cut motor insurance discounts, says CBUAE
UAE’s insurance companies and brokers don’t have much room to manoeuvre with on what rates they offer. Gone is the heavy discounting that used to be available for UAE car owners, at times irrespective of whether the individual had an indifferent claims record.
For many insurance companies, the focus was only on winning new policy holders to their motor portfolio. And the same on renewals, which is where the discount offers came in.
All that has changed.
The UAE Central Bank – which regulates the insurance sector – stepped in with clear diktats.
“In August last, the Central Bank cancelled discounts offered of up to 50 per cent for motorists that had an accident-free record over the previous 12-month policy period,” said a top official at a leading insurer.
“This is why car owners had to deal with the premium creeping upwards.”
This insurer reckons 2024 increases will still be there, at 5-10 per cent.
Fingers crossed on 2024 motor claims
Insurers and car owners alike will still be hoping that rate hikes in 2024 will come in at the lower end of the 5-10 per cent range.
According to Heimburger, “The average premium started to increase since August this year. The positive impact of this in the UAE motor insurance market will be seen only by end 2024. As a result, we expect 2024 to be another challenging year…”