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Car insurance premiums will keep going up for UAE owners

It is better for car owners in the UAE not to hope for their insurance premiums to reduce. It is less likely for the car insurance premiums to come down, that too after a year in which renewals and new contracts have been through sharp increases in premiums. The Emirates Insurance Authority (EIA) shall prevent insurers to offer premiums to win your business.

As per Mustafa Vazayil, who heads the brokerage firm Gargash Insurance, the EIA has been insistent that insurers underwriting motor have to clean up their books. This fact is all the more strengthened when their claims ratio and projected actuarial loss threaten the solvency of the business. In such a case, they will be asked to raise premiums. They might even need to recapitalize in a worst-case scenario. The insurers have no choice in this matter whatsoever.

Car owners in the UAE have been surfing along on “artificially low” motor rates since a long time ago. The typical insurers, with only a few exceptions among the international names, have been willing to go along on this ride, under-cutting the competition where possible. This specific strategy of theirs is laid on the very foundation of hope.

Consistent low premiums have been a solid reason behind the advent of car sales in 2011. This resulted into the owners going through a terrible jolt at the time of their policy renewals. For comprehensive agency repairs, the premiums were expected to have seen increases of Dh500-Dh1,000. This was way more when compared to the records of the previous years. These were not only meant for the expensive models.

Vazayil admitted that the earlier rates that were set in a “one size fits all” model caused issues. As per him, scientific underwriting based on driver’s track record, his/her age profile, the model being insured, etc., were emphasized. That was not happening to the required extent. The EIA wants to clean up the books of all insurers. They do not want to get into losses mounting at a few insurers as they stuck with low premiums on key lines. The first step is the Authority’s intervention on motor rates.

One needs to think hard from the perspective of an auto dealership. The auto dealership has offered one-year insurance for free and extended warranties as part of their incentives for new car buyers in the present times. They are putting ample pressure on insurers to come up with rates they consider excessive with the intent to keep their costs low.

The last thing dealerships will want to see is a further firming up of motor premiums next year, especially with new car sales in around the corner. Insurers claim that their flexibility in setting rates is in a tough bind, taking the EIA’s diktats into consideration.

Also, there is the VAT factor that comes into play within a handful of weeks. Dealerships might not be able to absorb that cost as well on top of whatever incentive they have on at the moment, such as free insurance for the first year, etc.

Dealerships that want insurers to cut down rates are also not out of the woods completely. When the premium value is lowered artificially, the intrinsic market value of that vehicle is impacted. It might only be by paying a premium of Dh5, 000 as opposed to the Dh8,000 that a luxury car requires based on its showroom value. This is the scenario that would develop if dealers force insurers to toe their line on premiums.

As per several Car industry sources, they will continue to offer free insurance guarantees for new car purchases for a year. However, it shall not involve the absorbing of VAT payments as a valid option.

In January, this is what the car buyer needs to come up with.

The gap is stretched for agency and non-agency repair.

Car owners in the UAE will rather stick to agency repair when their insurance renewals come up. However, in the present times, some of these car owners are giving this a second thought.

There has been a noticeable increase in the quoted premiums for agency and non-agency repair in recent months. This could imply paying a premium of Dh1, 000-Dh1, 500 more for the benefits of a full-fledged agency repair if considered from a positive space. The additional premium can be a sizeable one to bear for cars that are beyond the three-year or five-year warranty cover.

Considering super-premium models, this can prove a significant outgo for the owner. As per Yalla compare, a full-fledged insurance for the Mercedes-Benz G63 AMG, one of the UAE’s favorite super-SUVs, will set buyers back an average of Dh10, 225 if agency repair is selected as an add-on. Convertible supercars are even pricier. This fully comprehensive insurance for the Maserati GranCabrio comes in at an average of Dh19, 095 with agency repair while fully comprehensive cover for the Ferrari California costs an average of Dh20, 010.



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