UAE car owners will be paying a lot more on motor insurance for first time in three years

“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.

- Avinash Babur of InsuranceMarket.ae

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.

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.

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.

- Hanaa Al Hinai, Deputy CEO of RSA UAE and Bahrain