Dubai: Be ready - UAE’s vehicle owners will soon have to pay out more on their motor insurance premiums as their next renewal comes around. And they have only themselves to blame. (The only ones who will not have to worry immediately are the new car owners, because it has become standard practice among dealerships to pay the initial insurance cover out of their own pockets.)
Insurance industry sources says that the number of claims generated on accidents involving vehicles have shot back to near pre-Covid levels. Some insurers say that the claim payouts have been particularly high this month, especially with more traffic building up after schools re-opened.
“Whether it’s only a dent or a more serious mishap, the number of claims and the average cost on each claim have been accelerating,” said a senior insurance industry source. “A lot of the accidents are now created from sheer driver carelessness – because many are re-learning how to drive on packed roads all over again. But there is a mounting cost to it and insurers are worried.”
Ever popular models such as Toyota Land Cruiser (around Dh1,600), the Nissan Patrol (Dh1,900 on average), Mitsubishi Pajero (about Dh1,250), and Toyota Corolla (Dh900) could be heading for 15-25 premium hikes. Of course, a lot will also depend on the owner’s claims history over the previous 12 months. Even then, there is still some way for premiums to go.
In cash terms, average premiums for a comprehensive cover pre-pandemic were at around Dh1,700, whereas now they are at around Dh1,300 and even dropped to “as low” as Dh1,250 earlier this year. For that, COVID-19 was the cause, with most residents still adopting a work-from-home approach and schools most dealing in online lessons.
Back to reality
It sure did not take long for UAE’s car owners and their insurers to get a reality check. “With over half of 2020 spent in either full or partial lockdown, motor premiums were falling as vehicles were left unused and roads deserted,” said Avinash Babur, CEO of InsuranceMarket.ae. “Getting back to pre-peak pandemic lives has meant that cars are being used, and claims are being made: both of which are influential factors on the way in which premiums are calculated.
“From 2020 until June 2021, overall minimum premiums were down by 30 per cent. The increases until now are marginal at around 10-15 per cent.”
Boxed into a corner
For most UAE insurers, big and small, 2020 ended with their motor-related portfolio in relatively healthy states. Last year, new car sales had dropped by more than 30 per cent over 2019, and insurers were mostly reliant on renewals. As Babur said, with fewer accidents happening, insurers slashed premiums on renewals to “reward” their clients.
“Insurers had to drop premiums, because last year clients were chasing discounts in every deal,” said an insurer. “Many were worried about job and financial situations, and the only way insurers could offer some respite was to cut their premiums. If they didn’t, their clients would easily skip to another insurer who did.”
Hurting them badly
This is why the sudden spike in vehicle accident-related claims have caught insurers totally unprepared. They find themselves in a situation where the motor premiums are down while claims are building up. For this year, most insurers are likely to report deep dents to their motor lines – and there’s still a good three months to go for the claims to pile up.