In a surprising turn of events, the average car insurance premium in the UAE has experienced a notable 5% drop this year. However, car owners should not get too comfortable with this cost reduction, as the era of discounted premiums is on the verge of conclusion.
Upward Trajectory in 2023: Breaking the Decline Pattern
After enjoying almost three years of stability or decline, auto insurance premiums are set to ascend across all vehicle classes in 2023. Insurers find themselves at a crossroads, unable to further downsize their car portfolios, according to industry sources.
Claims Surge: A Pivotal Factor
Insight from various insurers indicates a surge in claims frequency, exerting significant pressure on claims ratios. Avinash Babur from InsuranceMarket.ae sheds light on this trend, emphasizing the challenges insurers face.
Impact on Mid-Range Models
Mid-priced entry-level vehicles are expected to bear the brunt, facing higher premiums. This is attributed to the substantial discounts offered on these models, compelling insurance companies to encourage owners to renew their policies.
Price Dynamics: A Closer Look
Examining specific models, the Toyota Corolla, priced at around Dh830, and the Honda Accord, closer to Dh1,000, highlight the shift. In the SUV category, the average selling price of the Nissan Patrol stands at Dh1,956, with the Toyota Land Cruiser averaging Dh1,711.
Premium Trends Unveiled
In 2021, premiums for the most popular cars remained stable, averaging over MAD 1,300. However, in 2022, average premiums have not only fallen but are now 5% lower than the same period in the previous year. For sedans, the average premium is approximately Dh900, compared to Dh975 the previous year, while the minimum premium for an SUV is around Dh1,150, down from Dh1,250.
Anticipated Hikes: Factors at Play
Avinash Babur predicts immediate increases, attributing them to inflationary cost pressures arising from global shortages of auto parts needed for repairs. The impact of these inflation-linked premium costs on consumers remains to be seen, further complicated by evolving solvency regulations.
Navigating the Changes: Tips for Car Owners
Toshita Chauhan, Head of General Insurance at Policybazaar.ae, advocates for maintaining a “claims-free” record to secure discounts in the current market conditions, potentially reaching up to 30% on the base premium. Differentiating between agency and non-agency insurance, additional discounts of varying percentages are available, offering car owners avenues to save on premiums.
Optimizing Car Value and Valuation
Juntian, an industry expert, highlights the importance of ensuring accurate car valuation. While premiums are a percentage of the sum insured, a slightly lower valuation can translate to cost savings. However, insurers retain the right to agree or disagree with the valuation, emphasizing the need for alignment between policyholders and insurers.
Reassessing Add-Ons: The Outpost Repairs Conundrum
Toshita advises against overlooking outpost repairs, emphasizing that institutional catering insurance may be an unnecessary expense. Assessing the necessity of additional coverage is crucial to avoid unnecessary financial burdens.
Digital Transformation: A Game-Changer in Insurance
With the rise of digital banking in the UAE, Kamal Insurance, a subsidiary of RSA, introduces a “digital-only” third-party car insurance model. Operating exclusively online, this approach aims to streamline the purchasing process, offering customers the ability to obtain quotes and purchase policies within a mere 2 minutes.
As the landscape of auto insurance in the UAE undergoes significant shifts, staying informed and proactive becomes paramount for both insurers and car owners alike.