Dubai: Motor insurance renewals are starting to affect UAE consumers, with average premium increases in the first two months ranging from 7.7% to 11% compared to the previous year, depending on the vehicle, model year, and, of course, the owner’s claims history.
Sources in the insurance business say that this big of a rise in such a short amount of time has never happened before. It also happens at the same time that losses on insurers’ motor lines are piling up at an unsustainable rate.This implies SUV renewals cost approximately Dh1,300, while sedans cost approximately Dh1,100. (On premium automobiles, add a few hundred more.)
According to market sources, there were more accident-related claims during these two months, and this will also play a factor in determining how high auto insurance premiums could go for the remainder of 2023. (Late last year, some of the largest insurers in the UAE reached an ‘informal’ agreement to increase automobile premiums beginning in early 2023.)
The increases have a disproportionately negative impact on those who bought cars last year with free insurance for the first year.Since March of last year, these car owners have also had to deal with periodic rate increases that have resulted in increased monthly payments on their auto loans. (Add several hundred dollars to the EMI as a result.)
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Dealerships are concerned that this year’s purchase decisions will be slowed by the rising cost of ownership. Some of them are considering offering free insurance for longer than one year, as well as contacting banks to see if they are ready to extend extended “no payments” periods to auto buyers. Avinash Babur, CEO of InsuranceMarket.ae, stated that the insurance price for a two-year-old car costing between Dh70,000 and Dh80,000 is increasing to pre-Covid levels. Prior to the pandemic, premiums were relatively constant, with small year-to-year changes. This year’s situation is distorted by the fact that car owners are comparing premium increases to the huge drops observed in 2020–21, when fewer people were driving and the number of incidents dropped sharply.
The increase in auto accident claims in January can be attributed to a number of causes, including the slick roadways caused by the weather.
vehicle owner worries
Sources in the insurance business say that they are well aware of how rising auto insurance premiums and auto loan payments are putting more strain on consumers’ budgets.They argue that they are unable to offer reduced premiums since their options are limited. The UAE insurance industry regulator, the Central Bank, does not want to see ‘unhealthy’ premium practises, according to a top insurance official at a Dubai company. “Insurers recognise that reducing rates will only result in future losses for them. And in these times, this cannot be allowed to continue.”
In its report on the results and projections for 2022, Abu Dhabi National Insurance Co. states, “The insurance market is beginning to exhibit signs of softening across multiple products following recent rating discipline in the commercial sector.” Regarding auto rates in particular, ADNIC asserts that the market is undergoing “rationalisation.” Will dealerships have a say?
This could put a lot of pressure on car dealers, who might have to offer longer warranties and incentives like free insurance for longer periods of time.Similarly, it may be tough to do so here. One dealer stated, “Extended warranties are currently available, but extending more than one year of complimentary insurance or registration will be problematic.” “It may be conceivable for luxury cars or a new entrant to the market. However, not for all.” Because dealers fear that if they offer longer free insurance, it would quickly become the norm, making its withdrawal difficult.
Also, sales of new cars in the UAE are going up by 10% every year, so dealers are not under any pressure to get rid of their stock.In most instances, cars entering showrooms have been sold well in advance.
What choices do automobile owners with an imminent motor replacement have? Be prepared to pay more.