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Customers set to benefit from a 'perfect storm' in the insurance market

Filed on July 23, 2020 | Last updated on July 23, 2020 at 06.45 pm

As Dubai slowly returns to some kind of normal, the aftermath of the recent lockdown is being felt particularly keenly in the insurance markets, particularly that of car insurance.

Insurers have been faced with a 'perfect storm' of decreasing premiums due to fewer accidents, lower mileage being driven by users, further driving down prices and amongst all this, a massive increase in the requirement to service more customer enquires online and through call centres.

Brokers, particularly, are experiencing a surge in enquiries, none more so than InsuranceMarket.ae whose Founder and CEO, Avinash Babur explains to Khaleej Times in our latest interview, how he and the team have not just coped but expanded operations during lockdown.

Excerpts from the interview

Can you tell us how your digital team have coped during lockdown?

As more people were forced to stay home, so we saw an increased number of online transactions being processed through our system. In fact, we set a new company record for online transactions during lockdown and now customers have experienced getting insurance his way, we can see this trend continuing.

Of course, as our mission is to save clients time and money on insurances for their car, health, home, life, travels or business, this has given us the opportunity to help even more people than ever before.

Our digital and customer service teams responded magnificently and we were delighted that all our systems operated perfectly and that more customers were helped than ever before. Overall I'd say we did an outstanding job helping people get great value for money in what was a difficult time for everyone.

Have insurance premiums actually come down following lockdown?

Well, as the number of accidents dropped, so have the number of claims and as such it automatically means that insurers are able to offer better premiums at renewal. It makes sense that it you have had another year of accident free driving and overall, insurance claims have dropped, that insurers will factor this into the premiums for 2020/21.

And looking ahead, voluntary social distancing in some form may well continue until the end of the year or until the vaccination is developed and widely available, so we expect accident rates and therefore premiums to be lower for the rest of the year.

Has the valuation of cars been impacted?

Interestingly, we have seen the second hand values decreasing, predominantly as rent-a-car companies and private owners resort to distress sales. In any market you need a balance of buyers and sellers and currently there are more sellers than buyers which drives prices down.

This applies to both new and used cars and of course, this will impact on premiums moving forward.

So has the market for car insurance decreased?

At a macro scale there is definitely a reduction in market sized as customers retain their vehicles for longer or defer upgrading, as their current vehicle can last just a little bit longer due to lower usage, and this, of course, means the market shrinks slightly.

Will there be continued reductions in car insurance post pandemic?

We definitely think this is a possibility. We've already seen the drop in rates and we think that the combination of downward pressure on demand and a change to normal driving patterns will mean better prices on insurance policies in the coming year.

The great news for all of our customers is that our market coverage means that we are best placed of all the brokers in the UAE, to offer better prices for people renewing their policies.

I would urge anyone with a renewal coming up to definitely talk to us before renewing. We are finding that the rates are changing with such frequency that we can, in most cases, find a better deal for people just from talking to us. No one should simply be renewing automatically without checking their policy with the team at InsuranceMarket.ae.

So, do the changes in market conditions mean there is an opportunity for usage-based insurance?

That's an interesting question. Of course, we have been looking at this for some time and usage based insurance, or UBI, does have its attractions when you look at the current environment.

The problem with this is that overall margins for insurers in the UAE have always been thin, some would say too thin, due to competitive pressures, and this is likely to continue as conventional insurers will adjust rates to match the reduction in driving, thus making it difficult for UBI insurance to truly succeed in delivering meaningful value to consumers.

In short, there is a case for it to grow but until the economics make it worthwhile for users, brokers and insurance companies, it may attract a limited usage.

Do you have any final words of advice for anyone renewing their car insurance in the next month or so?

Yes, definitely ask us for a quote first. We are finding that in the majority of cases over the past few weeks we have been able to find people great savings on their car insurance renewals and in some cases, save people significant sums of money. It's so easy to go online at InsuranceMarket.ae and our team can check in minutes whether we can save you money.