UAE motor insurance overhaul offers more benefits, but premiums may go up

UAE insurance companies have hailed the overhaul of motor insurance policy regulations that will offer customers more clarity and benefits such as courtesy cars but warned that premiums may go up to cover increased costs.

Under the new rules to be introduced next year, motorists will also see liability coverage extend to husbands, wives, children and parents – as well as a sharp increase in cover for property destruction. Damage inflicted on property belonging to others in a vehicular accident is now insured to a maximum of Dh2 million from Dh250,000.

However, the changes – which brings civil liability, or third party cover, and comprehensive loss and damage cover under the same policy – will come with increased costs for insurers and that’s likely to be passed on to customers.

“The increased third party property damage will give a wider solution for customers to transfer more risks to the insurance companies. This, however, will have a direct impact on the average claim cost and also the cost of reinsurance,” said Issam Mouslimani, the head of retail product offering at AXA Insurance Gulf.

“Such an increase of average claim cost can be either offset by increasing the insurance premium or reducing the frequency of accidents.”

At the same time, Mr Mouslimani praised the transparency of the new regulations. It is now clearer when a car must be deemed a total loss and how much the insurer must pay when a vehicle is written off – points that previously led to many disagreements between insurance companies and their customers.

As well as the increase in third party cover and property damage, the other most salient part of the new regulation is that it will be mandatory for insurance companies to give policyholders compensation equivalent to the cost of a replacement car after an accident for a maximum of 10 days and a value of up to Dh300 per day.

A replacement, or courtesy, car – or cash for a rental – is sometimes provided when a vehicle is under repair but until now this has been entirely dependent on the type of policy and insurer.

The unification of the regulation results in many more benefits being provided to policyholders, said Ibrahim Obaid Al Zaabi, the director general of the Insurance Authority, who announced the changes last week.

“The Insurance Authority has always demonstrated a strong focus on adopting best practices from international markets in order to refine the local industry,” said Andrew Brody, the executive vice president for consumer lines at Oman Insurance Company.

“A unified policy greatly helps to set market norms that are clear and transparent for all insured customers in the UAE.”

There are 91 registered insurance companies in the UAE, according to the Insurance Authority. Not all of them offer motor insurance but in recent years the insurance industry has become highly competitive, leading to an overall drop in the price of insurance.

While this has been good for consumers, it has led to losses among many insurers. Some have quit the non-life insurance business altogether in the UAE, such as Zurich Insurance, which exited in November last year.

The premiums insurance companies received through vehicle policies last year reached Dh5.6 billion, comprising about a fifth of all insurance premiums, according to the Insurance Authority.

The UAE had 10.9 road fatalities per 100,000 people last year and it is estimated that 1.3 per cent of gross domestic product was lost due to road traffic crashes, according to the latest statistics from the World Health Organisation.

Deaths on the road have, however, fallen by about half since 2004 after a number of road safety campaigns.

Under the new guidelines, good drivers will continue to obtain discounts on their insurance premiums and drivers with poor records will be made to pay more.

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Mahmoud Kassem

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