Insurers in the UAE are responding to the steep claims on their motor portfolio with premium hikes, 'dynamic' pricing of renewals, and insisting on no-agency repair option. Image Credit: Shutterstock

Dubai: Vehicle owners in the UAE are finding that they will have to pay a steep increase on their motor insurance renewals – and also in the way that insurers are calculating those premiums. The effect of this is already being felt on those vehicles that sustained damages during the April rains and have now come up for their annual insurance cover renewals.

For instance, insurance industry sources say that a handful of insurers are bringing in ‘dynamic’ pricing in fixing the new motor premiums. “This is based on how a particular model performed during the rains and floods,” said an insurer. “Based on this data, the technical pricing will be adjusted and the premiums will reflect that.”

Expect more insurers to follow this strategy as the full extent of the claims from the rains become clear through the coming weeks.

As such, individual car owners and fleet operators are seeing double-digit hikes on their new premiums. Some policies will only be renewed only with ‘no-agency’ repair option, even in instances where the vehicles are relatively new and have not had any major claims associated with it previously.

How will car dealerships respond?
For dealerships, having their customers bring back their vehicles for service and repair even after the standard 3- to 5-year warranty periods represent a significant income generation. If insurers now are insisting that they will offer motor insurance renewals with no-agency repair option, this will end up impacting dealers.

In the coming weeks, dealers are expected to come up with new incentives to soothe car buyer concerns over their insurance premiums and after-sale repair options.

Reinsurance pressure

Adding to the pressure on UAE insurers is the imminent July 1 deadline when many will have their reinsurance contracts renewed. Given the sizeable claims on their motor insurance portfolio, these reinsurance contracts will definitely end up hurting insurer margins. (Reinsurance support is critical because that decides the extent of what insurers are able to offer by way of cover to their clients each year. For instance, based on the claims, an insurer in the UAE might not get enough ‘capacity’ support from reinsurers to underwrite motor insurance beyond a limit during that 12-month timeframe.)

“Some insurers anticipate average premium increases of 20-25 per cent due to pressure from reinsurers,” said Avinash Babur, CEO of “This increase is expected to affect all top-selling car models, including SUVs, during the next renewals.”

Fleet operators face the brunt

Whether it’s a 20 car fleet operator or one with hundreds, their next premiums will be adding to their costs significantly.

“Fleet insurance rates have already risen by 40-50 per cent and more in some cases, and do not provide for agency cover any more,” said an official at a leading insurance brokerage firm.

“Even for individual owned cars, rates have risen by more than 35-40 per cent for policies with agency repair - and by more than 25 per cent without agency cover.

“This is in direct response to the recent floods that ended up damaging a lot of vehicles.

“This rise has been more dramatic in the secondhand car market, where in many cases comprehensive insurance rates (excluding agency repair) has risen by more than 55 per cent.”