UAE motorists to pay more for insurance in 2017

More than one-third of motorists in the UAE will have to pay higher premiums for their fully comprehensive car insurance in 2017 as a result of newly introduced tariffs from the UAE Insurance Authority.
As per the new unified tariff, which is effective from January 2017, saloon drivers will have to pay on an average Dh114 more for comprehensive insurance than they did in 2016 while SUV drivers will have to shell out Dh428 more than they paid in 2016.
Overall, affected UAE drivers will be paying an average of Dh262 more for comprehensive insurance in 2017, according to analysts.
The new tariff system will see UAE insurers adopt minimum insurance premiums of Dh1,300 for saloon cars, and Dh2,000 for SUVs. The system also sets maximum insurance premium rates of no more than five per cent of the value of a saloon car, or seven per cent of the value of an SUV.
However, despite the fee hikes, the new motor insurance rules introduced a few months ago by the regulator will have several positive aspects.
According to Ibrahim Obaid Al Zaabi, director general of the Insurance Authority, a nationwide unified vehicle insurance policy means it will be mandatory for insurance companies to provide policyholders with compensation equivalent to the cost for a replacement car after an accident for a maximum of 10 days and a value of up to Dh300 per day.
The new regulation brings both civil liability, or third party, cover, and comprehensive loss and damage cover, into the same policy.
Analysis from compareit4me.com, the Middle East's leading financial comparison site, shows that with very few people in the UAE paying more than five per cent or seven per cent for their insurance premiums (just 0.15 per cent in 2016), the biggest effect of the new tariff system will be that people pay more at the lower end of the market.
Statistics from compareit4me's insurance comparison platform shows that 30.86 per cent of saloon drivers currently pay less than the new minimum premium rate of Dh1,300. Meanwhile, 43.04 per cent of SUV drivers currently pay less than next year's minimum premium rate of Dh2,000. Taking these two groups together, 35.6 per cent of UAE drivers will end up having to pay more for their car insurance in 2017.
"What is perhaps an unintended consequence of the regulatory changes is that, while the owner of a luxury vehicle will emerge unscathed, the owner of an average family car is likely to be substantially worse off. The new tariff system will particularly hurt drivers of vehicles worth Dh50,000 or less - 82.8 per cent of such people will be worse off," said Radhika Agnihotri, analyst at compareit4me.com.
"By way of contrast, owners of vehicles worth more than Dh100,000 are unlikely to pay more than they had previously. If you're looking to save money on your insurance, then, we urge UAE drivers to compare quotes before purchasing comprehensive insurance in 2017. With prices going up, it is imperative that consumers shop around before signing for a policy," said Agnihotri.
"Furthermore, one very important change that many customers may not notice is that the minimum cap that an insurer can put on third-party property damage has been increased from Dh250,000 to Dh2 million," said Jonathan Rawling, CFO at compareit4me.com.
"The previous regime left scope for consumers to be substantially under-insured. Many consumers were perhaps unaware that some insurance policies were such that, if you caused an accident that resulted in more than Dh250,000 of damage to the other party, you would be personally liable for the difference. So, if you had a policy with an Dh250,000 limit, and you caused Dh750,000 of damage to a Ferrari, you would be personally liable for the missing Dh 500,000."
It is also expected that the introduction of a minimum premium price will partially address the UAE car insurance market's extended run of financial losses. As a result of the new minimum premium alone, the size of the UAE's comprehensive motor insurance market is estimated to grow by Dh136 million next year.
- issacjohn@khaleejtimes.com