UAE car insurance premiums have already started to shoot up – how high can they go?
Cutting across models, motor premiums start 2023 on a high and could speed up even further
Dubai: UAE’s vehicle owners find they are having to pay more on their motor insurance premiums, as some of the leading insurers move to cut down on the steep losses they got hit with on motor claims in 2022.
That motor premiums were to go up from 2023 had been signalled to vehicle owners in recent weeks, and there were also reports that nine of the leading insurance companies would start enforcing a higher premium.
Now, the extent of the premium increases are coming into sight for UAE’s car owners. A Tesla comes with an annual average gross premium of Dh3,500, while a Nissan Patrol would be in the range of Dh1,800 plus and with the chance of going further up. A Toyota Land Cruiser owner could soon be paying well over the Dh1,600 average of 2022, while the Toyota Corolla is still under Dh1,000.
And the insurance payout on a Mercedes S-Class? Cruising closer to Dh2,000 annually (but still way down on the Dh5,000 plus that was there in the first quarter of 2021).
Clearly, insurers are trying to claw back motor premiums after the steep declines recorded in the first-half of 2022. Some insurance industry sources say the increases were starting to show up in policy renewals even in Q4-2022.
“If we simply compare motor premiums across models from Q1-2022 to Q4-2022, we can see a 7.5 per cent increase,” said Avinash Babur, CEO of InsuranceMarket.ae.
The base has already been set for further hikes this year. UAE car owners will find it’s a hardening environment when it comes to motor insurance rates.
Those claims will cost you
Now, if the vehicle owner has been involved in an accident claim, brought on by his/her fault, then the next premium charged can really hurt. This is the year, they will be finding out how much financial pain they will be carrying.
What set off the motor insurance hikes?
The answer to that in two words – high claims. Based on industry feedback, insurers with sizeable motor portfolios got pummelled by the double-whammy. First, there was the extremely low premiums being charged on auto insurance renewals. (On new cars, these days, dealerships take care of the first year and even longer.)
Then came the higher incidence of accidents – plus more cases of complete write-offs – and which added to the claims insurers had to pay out. All this started showing up as early in their first-half 2022 financial results.
“These days, even a minor accident means higher claims on repairs than in the past,” said an insurer. “All of the new high-tech automation in new models comes with a cost – and insurers have been finding that out in 2022. It has reached a stage where insurers could not absorb the losses any longer.”
Pass them on to car owners
This is what’s happening now – get owners to pay more and make them realise quickly that 2022 was the exception when it comes to low motor premiums. If nine of the leading insurers stick to their deal of not offering steep discounts on motor premiums, then the full impact will start to show up between now and through the rest of this year. So, vehicle owners trying to shop around for the lowest premiums on offer will find there is not much difference between what’s being offered by the various insurers.
Their first target would be to get premiums back to 2021 levels and then drive them back to 2019 rates. (2020 was the exception because of the pandemic and the severe disruption it had on road traffic as people took to WFH.)
Safe driving
Insurance industry sources say that ultimately drivers can decide how much they end up paying at renewal time. “Those with 100 per cent safety records will not be charged a heavy premium,” said an insurer. “It’s only that premiums are going back to where they were before 2020 – and that too gradually.”
As for car owners, they will find that higher motor premiums is just one more additional cost they have to bear…