Lowering the driving age could cause insurance premiums to go up. Image Credit: Francois Nel/Gulf News

Dubai: Sleek and luxury fast cars, or those souped-up speedsters from a Batman or James Bond film, are indeed a sight to behold on the roads, but before you turn green with envy, here’s something to consider: some of them may be under-insured.

A new study released on Monday claimed that drivers of sports cars in the UAE may be under-insured – in some cases drastically.

The research, done by yallacompare, found that there is a discrepancy between the average selling price of fast vehicles and the value for which these units are insured.  The conclusion was drawn mainly from the study of insurance policies and resale values of 2014 model year cars.

“Many second-hand sports cars are being sold for more than the average insured value of these cars,” the firm said. “With some models, the differences are stark.”

A 2014 Porsche 911 Carrera 4, for example, is usually insured for Dh215,000, but the same car is being sold for Dh346,000 at second-hand dealerships in the UAE.

The same trend can be said for 2014 BMW Z4 sDrive 28i units, which have a resale value of Dh130,000, much higher than the car’s average insured value of Dh108,300.

There are less extreme discrepancies for other models, such as the 2014 Dodge Challenger R/T, which has an average insured value of Dh70,100 and an average cost of Dh82,300.

When cars are under-insured, the driver may end up taking more money out of his pocket to pay for expenses in the event of an accident or damage.

Jonathan Rawling, CFO of yallacompare, said it is likely that car dealers are over-charging for certain models or customers could be under-insuring their cars, to avoid paying high premiums.

“The first explanation can be largely, but not wholly rejected. It is certainly the case that assumed asymmetrical information between the buyer and seller will reduce the market value of a car at the point of purchase. In other words, if Person A purchases a car for Dh 200,000 on a Tuesday and tries to sell it to Person B on a Wednesday, Person B will question the sale, and assume that Person A has found something adverse about the car, or needs to get rid of it quickly,” he said.

This assumed asymmetrical information could explain the lower insured value of some sports cars. However, given the fact that many cars, including common sports utility vehicles, do not see the same discrepancy between insured value and selling price, there is evidence to suggest that the problem could actually be down to the fact that sports car drivers in the UAE are under-insured. 

“Either individuals are willingly under-insuring their cars, or insurers are unwilling to agree to the valuations of these cars,” Rawling said.

A closer look at the policies and sale value of other vehicles, on the other hand, would show huge discrepancies don’t exist.

2014 Mitsubishi Pajero GLS, for example, has an average insured value of Dh 60,340, and can be bought at second-hand dealerships for an average cost of Dh59,000.

 The same can be said of the 2014 Chevrolet Malibu LTZ, which goes for an average of Dh 50,000 at UAE dealerships and has an almost identical average insured value. The 2014 Jaguar XF 2.0-litre, meanwhile, has an average insured value of Dh 99,700, and an average selling price of Dh100,000.