Dubai: Japanese, Korean and Chinese car models in the UAE are seeing the highest increases in motor insurance premiums on renewals as the full impact of April’s rains is felt by vehicle owners and insurers alike.
On policy renewals with agency repairs allowed, the premium increases on Chinese makes have shot up by 26 per cent, while those for South Korean and Japanese models are higher by 25 per cent on average, according to insurance industry estimates.
For owners of German and American makes, their insurance payment outgo has come in relatively lower on renewals with agency repairs, by 9 per cent or so. “What insurers could see was that Chinese makes had a higher cost of repair challenge after the floods,” said Avinash Babur, CEO of InsuranceMarket.ae, the insurance industry aggregator. “Other Asian automotive models got caught up in the same trend.”
Interestingly, so far, premiums on EVs have not shot up significantly in the April to end of June period, which was what many vehicle owners had feared would happen. Instead, with EVs - and Tesla specifically - the average premium is up by a fairly manageable 10-15 per cent post-April.
Dealerships need to react fast
In the coming weeks, more auto dealers will likely consider the possibility of offering multi-year free insurance coverage on their new cars. (And in certain instances, on pre-owned vehicles too.)
“Insurance premiums have become a sticky point with car buyers in recent weeks,” said a top official at a leading dealership. “It’s buyers of entry- and mid-market car models who are extremely sensitive to insurance premium costs.
“Extending multi-year free insurance will not be an easy decision for dealers. One-year free is the standard, but we are thinking of allowing multi-year to select models. Plus, we already have the 5-year extended warranty program running concurrently.”
What are insurers doing?
By and large, insurers have released payments to vehicle owners who had to carry out extensive repairs on their vehicles after the April floods. Those owners who had agency repair provisions on their existing policy were better off, and most of these repairs have since been carried out.
Late last month, the insurer Watania Takaful issued a statement saying they had ‘zero’ rejections on motor claims after the rains.
In the immediate aftermath of the mid-April flooding, the company ‘received three times the daily average number of motor claims’ and an ‘average number of daily calls of over 1,000 from customers’.
The steep rise in claims has been challenging for the entire insurance supply chain from roadside assistance and recovery services to surveyors, repair workshops, dealer workshops, contractors and insurance companies
“Since then, 100 per cent of the claims submitted by customers were registered and processed within 50 per cent of the usual timeframe,” said a statement by Watania Takaful at the time.
“Settlement offers were made to nearly 70 per cent of them while, understandably, some customers are still exploring alternative options to repair their vehicles before agreeing to settlements.”
This is the feedback from other insurers as well. They confirm that claims with agency repair provisions were immediately cleared and alternate arrangements made available on those policies that did not have this feature.
“Most of our claims have already been approved, with many total losses already settled with vehicle owners,” said Babur. “Repairs are also moving along, though there are still some workshops with backlogs.”
