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UAE: Motorists to pay higher vehicle insurance premiums

Auto premiums were reduced due to a decline in car demand after the pandemic, but as the market comes back on track, the rates are being revised

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The UAE motorists will have to shell out more as insurance companies have increased auto premiums.

In 2020, Insurance Authority announced a Covid-19 discount of up to 50 per cent on premiums. Before Covid-19, insurance companies were allowed to discount up to 30 per cent, depending on the driver's history. In October 2020, the UAE government merged Insurance Authority with the Central Bank in order to boost the insurance industry’s role in the country’s economy.

"In November, we have seen all insurers announcing their rate change to reduce the impact of the 50 per cent discount scheme and streamline rates back to a minimum of up to 30 per cent discount," said Neeraj Gupta, CEO, Policybazaar UAE.

Earlier, insurance companies were allowed to offer a 10 per cent discount for a year for drivers with no claims, a 20 per cent discount on a two-year policy and 30 per cent for three years and above in case of no claim history.

Gupta added that insurance companies started revising premiums at the beginning of the third quarter, and most insurers would have changed their pricing by the end of November.

Hitesh Motwani, chief marketing officer, Insurancemarket.ae, said motor insurance premiums have been low since mid-2020 when the Insurance Authority announced Covid-19 discounts of up to 50 per cent.

"Minimum premium for a saloon vehicle was Dh1,300 and Dh2,000 for an SUV. This came down to Dh650 and Dh1,000, respectively. Currently, a saloon's average premium is between Dh1,000 and Dh1,200 for an SUV. This is expected to go up by 15-20 per cent in the upcoming year," he said, adding that premium is moving towards a stabilisation rate prior to the pandemic.

Talking about health insurance, he said average premiums increase around 5 to 10 per cent yearly due to factors such as the ageing population and healthcare inflation.

Reasons for the hike

While talking about the reasons for the increase in motor insurance premiums, Gupta said: "Claims are back to pre-Covid times, but the premium collection is 40 per cent lower. In order to maintain the loss ratios at a profitable position is what driving insurance companies to revise (up) their premiums."

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Moin ur Rehman, executive director, Unitrust Insurance Broker, said the market has immensely changed after the pandemic.

"There have been a lot of fluctuations over the period in terms of revenue and rates. This is a very competitive market where there is no stagnant rate. But to help recovery in the post-pandemic period, the rates have been drastically changed (by insurance firms)," he said.

Rehman added that auto premiums were reduced due to a decline in car demand after the pandemic, but as the market comes back on track, the rates are being revised upward to previous levels.

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