As the city grapples with the threat of fires in towers, a survey by comparison site Yallacompare has revealed that nearly 70 per cent of UAE residents have not signed up for a home contents insurance policy. And this is despite the fact that 84.5 per cent of UAE residents admit in the survey that they would feel more comfortable in the knowledge that their belongings are covered by home insurance when they travel.
“The home insurance market in the UAE is relatively small when compared to the country’s entire insurance market,” says Jonathan Rawling, chief financial officer of Yallacompare, formerly Compareit4me. “A survey we recently conducted found that 69.1 per cent of UAE residents are not covered by home insurance, despite the majority understanding the risks of not being covered.”
Lack of awareness
Fears surrounding the safety of homes are common, especially during the onset of summer as families plan vacations and dread the risk of a fire or burglary or accidental flooding damaging their property and belongings. However, despite this fear, most are not eager to take out an insurance policy, as they don’t see any real safety cover that a policy can bring.
“According to our survey, 35 per cent of respondents said that they don’t see the point in home insurance at all – so there’s certainly an element of UAE residents not seeing the benefits that a home insurance policy would offer,” says Rawling.
Abdul Muttaleb Al Jaedi, managing director and CEO of Union Insurance, agrees that most people do not know the extent of cover that can be provided by home policies. “Home insurance packages offer not just coverage for the building or the contents inside, but a host of inbuilt benefits such as the cost of alternate accommodation,” Al Jaedi.
With homes in Dubai being largely tenanted, Al Jaedi says home insurance often takes a backseat in the mind of the occupants, as they treat it as a temporary home. Additionally, as landlords own the responsibility for building or home insurance, most tenants assume that the same also covers their home contents.
Al Jaedi points out that most houses are under mortgage. In such cases, the occupant often believes that the funding bank is responsible for arranging insurance for the building. However, in practically all cases, the insurance does not cover the contents of the house. “Also, the building insurance may or may not be adequate to cover the building sufficiently,” he says.
Another reason for the low uptake of home insurance is the investment culture, which is not very risk averse. There is also no sense of urgency to insure personal belongings, with most respondents in the Yallacompare survey saying they are willing to “take a chance” rather than insure their home.
“There’s also a cultural element. Insurance is seen as a must-have in most Western markets, meaning that even if a policy isn’t mandatory, western expats prefer to take out coverage just to be on the safe side,” says Al Jaedi. “That view isn’t so widely accepted in Asian markets, where fixing or replacing belongings can be relatively cheap. In the UAE, though, we’d argue that the costs of replacing broken or lost belongings are expensive enough to warrant getting protection for them.”
The tendency to be risk averse might also be caused by the relative safety and security most people associate with the UAE. “Another major reason is the thought process that the probability of a loss is very low, hence this beats the purpose of protecting home contents,” says Al Jaedi.
Education and regulation
Experts agree that a combination of awareness drives and government regulations can help people understand the benefits better and encourage them to insure their assets and belongings.
“The best and the most effective remedy can be regulation that requires basic insurance, just to make sure that all are insured,” says Al Jaedi. “The cost of insurance will also become more effective. However, this may not be possible to enforce due to a lack of interest from the state. Hence, it becomes more of the interest of the owner or funding bank.”
Meanwhile, Saudi Arabia seems to be taking steps in the right direction, even as experts here say making home insurance a prerequisite with Ejari could be a big help for developers.
“In Saudi Arabia, there are certainly steps being taken towards regulation and it would be a good option,” says Rawling. “When your tenancy contract is registered with Ejari, you would have to show a home contents insurance policy to complete the process. It would mean that everyone living in Dubai would have adequate protection for their belongings. And protection doesn’t need to be expensive — you can buy a policy for as little as Dh300.”
Education can definitely help swing resident interest in favour of home insurance. Some experts believe that insurers also lack the drive to push awareness initiatives due to the low margins and extensive documentation associated with the home insurance product. However, changes are being made.
“For the ticket size and low margins, insurers also have not invested the desired amounts in creating awareness, vis-à-vis life insurance products, which are longer in term and more rewarding in premium and distribution commission,” says Al Jaedi. “As face-to-face selling is expensive in this country, traditional distribution channels may not find it efficient to invest in this product.
“However, this challenge is an opportunity for non-traditional distributors which are e-efficient, such as Yallacompare, as they have more efficient means of distribution. Insurers also should look at these new channels as an opportunity and facilitate them with straight-through products.”
Rawling thinks a lot is being done to create awareness, although also agrees that there is “still more work to be done on that front, but the industry as a whole is rising to the challenge”.
Home insurance is a clear winner when the cost of a policy is compared with the cost of replacement, with the former starting from Dh200 and the latter costing up to Dh30,000. More importantly, the safety, security and peace of mind a home cover delivers is unparalleled, as admitted by nearly 85 per cent of respondents in the Yallacompare survey.
“Home insurance shouldn’t be thought of as a ‘need to have’, but rather a ‘should have’,” explains Rawling. “It’s one of those things that offers protection and peace of mind for a relatively small payment. If, for whatever reason, the contents of your home are destroyed or stolen, home insurance may not be able to bring back lost belongings, but it’ll mean you can easily replace them.”
Plus these days, home insurance policies extend beyond simply protecting the belongings in one’s home to cover serious maintenance issues or even alternate accommodation in case of significant damage.
“If you’re living in a rented villa or apartment, the norm is that landlords cover maintenance issues if they amount to over Dh500. However, by purchasing home insurance, you can get coverage for emergency repair services to do with plumbing, electrics, door locks and air conditioning,” says Rawling.
While the number of people getting home cover insurance remains significantly lower than other parts of the world, a slow but sure change seems to be round the bend. “There is some encouragement: another survey carried out by QIC last year found that 90 per cent of UAE residents don’t take out home insurance,” says Rawling. “This means that there are more people in the UAE now deciding that this type of cover is one worth having.”
According to Yallacompare, its home insurance policy sales has tripled during the first half of the year, further underscoring the trend. However, there are still plenty of people still without protection, and it is never too late to protect your home and your beloved possessions.