UAE drivers switch gears down on car insurance premiums

Car owners get cost-conscious about insurance charges

Residents across the UAE are being careful about where they are putting their money, especially when it comes to paying for car insurance.

Many drivers have opted not to pay for extra add-ons in their car insurance packages in light of what they feel are increasing prices. 

Data from yallacompare.com showed that drivers in the UAE are paying an average of 15 per cent more for their car insurance in 2017 than in 2016. Owners of SUVs valued at under Dh50,000 have been hit particularly hard, with fully comprehensive premiums jumping by an average of 40.59 per cent, compared to 9.53 per cent for saloon car owners.

In another survey, Souqalmal.com disclosed a significant drop in the percentage of UAE consumers opting for agency repair as a policy add-on. While over 42 per cent of buyers opted for agency repair in 2016, this number dropped to 18 per cent in 2017. Most insurers in the UAE offer agency repair as a standard benefit for a period of up to three years. But, in most cases, car owners have the option to extend the agency repair coverage for up to five years. This feature is available as a policy add-on, subject to an additional premium.

"A rise in car insurance premiums following the introduction of the unified car insurance policy at the start of 2017, coupled with rising concerns about the future impact of VAT on the cost of living, has definitely had an impact on how customers are shopping for car insurance," said Ambareen Musa, founder and CEO of Souqalmal.

She said there is a noticeable trend in customers foregoing non-critical add-ons in favour of those that offer protection against the most common risks. "The trend we're seeing now is that customers are happy to settle for non-agency repair, the cheaper alternative. They are finding it increasingly difficult to justify the additional expense of opting for agency repair."

Cost-conscious approach
Mo Ismail, managing director at Mo2, noted that the cost of living in the UAE had gone up, forcing many drivers to re-evaluate what they are paying for when it comes to insurance. "It is not sustainable for people to do a lot of things anymore," he said. "Gasoline prices are up, which is actually bothering a lot of people on the roads right now."

Ismail, who drives a Hummer, said that he expects his car insurance to slightly increase. "My H2 is big and much older, but I pay for insurance that covers both me and other motorists, which comes up to Dh3,000 a year. Prices, however, fluctuate depending on if your car is old or new. For example, my new Jeep needed mandatory insurance, which is a bit costlier. I would advise people not to change their car every year, if they don't want to pay crazy premiums."

Similarly, Badriya Al Raeesi, a Dubai resident who has been driving for the past 12 years, noted that she had seen an increase in the prices of insurance packages.

"I have two cars, and before I used to go for upscale insurance agencies that had great service, but now I have switched to smaller companies, which are cheaper. The only opportunity cost I am losing is that I will have to adjust or suffer in case I meet with an accident."

Al Raeesi further said that she is thinking of buying a new car, but the costs for renewal and new insurance premiums has got her worried.

In addition, another sign that points towards UAE consumers taking a more cost-conscious approach is the drop in demand for personal accident coverage. Only 48 per cent of car insurance buyers on Souqalmal.com selected the personal accident cover for drivers in 2017, as compared to 65 per cent in 2016. This optional feature stretches the car owner's insurance coverage to include financial compensation if the driver dies or sustains a physical injury in the event of an accident. The maximum compensation under this cover is Dh200,000 for the person insured, across almost all UAE insurers.

Avinash Babur, CEO of InsuranceMarket.ae by Afia Insurance Brokerage Services, said that cost-conscious sentiments towards car insurance had also been noted in the used car segment. "Many factors are taken into consideration when purchasing a used car," he said.

"We are seeing a trend towards customers being more cost-conscious of not just the overall price of the car, but also associated costs such as insurance premiums. Insurance premiums can vary for the same car make and model based on several factors, including the age of the driver, their claims history, and even the specific version of the same model."

Slight relief
When asked about the increasing prices for car insurance, several drivers noted the relief that was going to be provided by a recent decision that would offer a discount on premiums for safe drivers. In accordance with the UAE Insurance Authority board of directors' decision No. 41 of 2017, drivers with a no-claim record of one to three years are entitled to an assured reduction in premium ranging between 10 and 20 per cent upon renewal of their policy.

"This will definitely encourage people to drive better, and incur less citations," Ismail said. "The cleaner you are, the lesser your insurance costs." However, Jacob Koshy, MD of Northern Insurance Brokers, noted that premiums had become very competitive and, as a result, rates were now more attractive than ever before. He noted that there was not much of a change in residents buying car insurance because everyone was required to have a basic cover as dictated by the road authorities. What drivers need to be careful about is what the package covers, he said.

"Sometimes people opt for extra cover," he said. "This can be something like protection for when you take the car off-road and into the desert, which is a popular activity here in the UAE. Many packages don't cover damage caused by off-road activities, so drivers have to pay extra for that coverage. The choice on what to get in the car insurance package will always depend on the driver of the vehicle."

This is evident in Souqalmal.com's data, which showed that while more customers opted for add-on benefits like fire and theft cover, roadside assistance, emergency medical expenses, natural calamities cover and such, fewer were willing to pay extra for off-road cover, dent repair, GCC cover and Oman extension, among others.

Zawya