Why your insurance may get more expensive in the UAE

Dubai: Insurance premiums in the UAE could become more expensive as insurers face rising claims, higher technology costs and tougher regulatory demands, according to a new Alpen Capital report released Wednesday, May 20.

The warning comes as the UAE insurance sector continues to grow, but with mounting pressure beneath the surface — especially for smaller players struggling to keep up in an increasingly competitive market.

“Intense competition persists, with a relatively large number of insurers competing for a market size that may not be fully commensurate, putting pressure on pricing and profitability,” said Fareed Lutfi, Secretary General of the Emirates Insurance Association and Gulf Insurance Federation, in comments included in the report.

“Additionally, constraints around reinsurance capacity remain a concern,” he added.

One major factor is claims inflation.

After the 2024 UAE floods triggered a sharp spike in motor and property claims, insurers raised prices in some segments by around 30 per cent, while deductibles also moved higher as insurers reassessed risks and catastrophe exposure, Alpen Capital said.

That means policyholders renewing car or property insurance may continue to feel the pressure through higher premiums or stricter policy terms.

The report also warns that insurers are grappling with rising operational expenses and more expensive reinsurance, adding to cost pressures across the sector.

While larger UAE insurers have benefited from stronger capital positions and pricing adjustments, smaller insurers are finding it harder to absorb rising costs.

Alpen Capital says tighter solvency rules, increasing technology investment and competitive pricing are putting pressure on margins, potentially leading to more mergers as weaker players struggle to stay profitable.

“High-operating costs combined with a strengthening regulatory environment is making it increasingly difficult for weaker players to sustain the same level of growth and profitability,” the report said, adding that this is likely to lead to more consolidation across the market.

Another big shift is happening online.

Digital-first insurers and comparison platforms are changing how insurance is bought and priced in the UAE, using AI, automation and big data to speed up claims and offer more personalised pricing.

But not everyone can keep pace.

“The ongoing war in the Middle East has triggered wide-ranging economic and insurance market disruptions,” Lutfi said in the report, warning that insurers are facing “higher default rates” and increased financial pressure in a volatile risk environment. He added: “In this volatile landscape, insurers with advanced, digitized pricing capabilities are better positioned to respond quickly and manage evolving risk exposures in real time.”

That digital race is becoming another challenge for smaller insurers, which may struggle to fund expensive technology upgrades while also meeting stricter capital requirements.

“Market fragmentation is another issue, particularly in the UAE where a large number of insurers operate, leading to intense competition and pricing pressures, said Sunil Kohli, chief executive of Dhofar Insurance Company S.A.O.G.

The UAE remains one of the GCC’s largest insurance markets, accounting for nearly 40 per cent of the region's gross written premiums in 2024 and benefiting from population growth, compulsory insurance schemes and economic expansion.

“Over the next five years, the region’s insurable asset base is expected to rise significantly with the planned completion of large-scale infrastructure projects, benefiting the non-life segment,” said TM Lakshmanan, Chief Executive Officer, Alpen Capital.

But Alpen Capital says the sector’s growth story comes with a clear warning: rising costs, fierce competition and a widening gap between large and small insurers could eventually be felt by consumers through higher premiums and fewer choices in the market.

“The region is also witnessing increased demand for risk-related insurance products due to natural calamities and unstable geopolitical conditions. Although the sector is maturing, insurance penetration rates across the region remain below international standards, highlighting significant room for growth”, said Lakshmanan.

UAE is expected to remain the insurance hub of the GCC.  Kohli said that among regional markets, Saudi Arabia and the UAE stand out as the fastest growing. He said insurance premiums in the UAE is expected to experience high single-digit to low double-digit growth rates.

“In the UAE, rise in the number of HNWIs has been supporting growth by expanding the customer base for personal insurance products,” he said.