Dubai: Is the ‘free’ ride over for UAE car owners on their motor insurance?
After nearly three years of declines or remains stable, motor premiums are heading for increases in 2023, cutting across vehicle categories. Insurance companies, sources say, have no further room to cut corners on their motor portfolio.
“Rising repair costs and increased frequency of accident/damage claims compared to the Covid years of 2020-21 will force rate increases,” said Avinash Babur, CEO of InsuranceMarket.ae. “The days of motor premiums being considerably discounted due to fewer cars on the road leading to lower claims are over.
The feedback from all the insurers in the market is that claims frequency is consistently on the rise, thus putting pressure on loss ratios.
In the first six months, UAE insurers has solid - rather than spectacular - numbers to show for their efforts. Based on market feedback, motor-related portfolios for most of the big players recorded steep declines because of claims.
Lower-to-mid models will be hit hard
According to Babur, higher premiums will most likely be felt on entry-to-mid priced vehicles, because this is where the biggest discounts had been offered in 2020-21 as insurers focussed on getting vehicle owners to renew their policies. (With work-from-home being the norm, vehicle usage became minimal during the better part of 2020, and some of that was reflected through 2021 too.) Premium on a Toyota Corolla is around the Dh830 mark, while a Honda Accord is seen as inching close to Dh1,000. When it comes to SUVs, it’s Dh1,956 for a Nissan Patrol and Dh1,711 for a Toyota Land Cruiser on average.
* In 2022, average premiums had actually dropped, and currently 5% lower than the same time in 2021.
* For sedans, average premiums are around the Dh900 mark as compared to Dh975 last year, whereas the minimum premium for SUVs are at around Dh1,150 as compared to Dh1,250 a year ago.
Hikes starting now?
Babur reckons that some increases will even be felt with immediate effect - vehicle owners will need to blame inflationary cost pressures for that.
“It’s more likely that inflationary pressures from global supply shortages of vehicle parts needed to repair insured vehicles are going to be passed on to consumers in the months to come,” he added. “For now, this inflation-linked cost on motor insurance premiums is yet to be seen.”
“Insurers are now assessing the impact of inflationary pressures on their portfolios as well as preparing for higher standards of financial reporting under IFRS 17 and greater enforcement of local solvency regulations.”
Aim for ‘no-claim’
Is there any way UAE vehicle owners can avoid a looming hike to their premium payouts? Toshita Chauhan, Head of Business – General Insurance at Policybazaar.ae, reckons the best way to do so would be to have a ‘no-claims’ record. Because that’s the best way under current market circumstances to snag a discount, and fairly sizeable ones too.
“If you have been a driver who has not claimed on their motor insurance policy for certain numbers, you can avail the no claim discount benefit offered by insurance companies,” said Toshita.
Insurers currently offer no-claim discounts of up to 30 per cent on the current base premiums.
* Non-agency or garage cover - starting from 1.2% of the car value.
* Over these minimum levels, insurers in the UAE offer no-claim discounts of up to 30%.
Another way would be on the car value. “While it’s important to ensure that your car is appropriately valued in your policy, it is worth noting that since your premium is a percentage of the sum insured (i.e., the car value) you can save some money if you value your car a little lower,” said Toshita.
“However, the valuation should be accepted by your insurance company and they do have a right not to accept. Car insurance policies in the UAE are ‘agreed value policies’, which means that the policyholder and the insurance company both have to agree on a valuation for the vehicle at the time of policy issuance.”
And then there’s outside-of-agency repairs. “Agency repair cover can really cost a lot more and in the end, it may not even be something that you really need,” said Toshita.
Kamal Insurance is a subsidiary of RSA, which has had a longstanding presence in this market. The new entity offers ‘digital-only’ third-party car insurance in the UAE, with base premiums from Dh350.
“To keep policy prices down, ‘this product will only be available online’ on its portal, and ‘this means customers don’t have to use other channels, wait around and pay more’.
Not just that, “Customers can get a quote and buy their car insurance policy in less than 2 minutes’.
In order to remain relevant in the future, we must embrace digitalization to deliver a culture of customer excellence, because they buy experiences and emotions rather than just objects or services. After speaking to many of them we realized buying third-party insurance in the UAE market was not easy. Kamal Insurance will change this.
- Hanaa Al Hinai, Deputy CEO of RSA UAE and Bahrain