Motorists in the UAE may have to pay more for a fully comprehensive car insurance in 2017 under a new tariff system, that is set to be implemented from January 1.
The new tariff system, implemented by the UAE Insurance Authority, sets minimum insurance premiums at Dhs1,300 for saloon cars and Dhs2,000 for SUVs. The system also sets maximum insurance premium rates of no more than 5 per cent of the value of a saloon car, or 7 per cent of the value of an SUV.
With just about 0.15 per cent of people in the UAE paying more than 5 per cent or 7 per cent for their insurance premiums, the biggest effect will be on the lower end of the market, a report by financial comparison site compareit4me.com found.
Over 35 per cent of drivers in the UAE will have to shell out more for insurance under the new system, it stated.
According to data from compareit4me, 30.86 per cent of saloon drivers currently pay less than the new minimum premium rate of Dhs1,300. Meanwhile, 43.04 per cent of SUV drivers presently pay less than Dhs2,000.
On average, saloon drivers will have to pay Dhs114 more for comprehensive insurance in 2017 than they did in 2016. For SUV drivers, an average increase of Dhs428 is expected, the report calculated.
Overall, UAE drivers will be paying an average of Dhs262 more for comprehensive insurance in 2017.
“What is perhaps an unintended consequence of the regulatory changes is that, while the owner of a luxury vehicle will emerge unscathed, the owner of an average family car is likely to be substantially worse off,” said Radhika Agnihotri, insight analyst at compareit4me.com.
“The new tariff system will particularly hurt drivers of vehicles worth Dhs50,000 or less – 82.8 per cent of such people will be worse off.
“By way of contrast, owners of vehicles worth more than Dhs100,000 are unlikely to pay more than they had previously. With prices going up, it is imperative that consumers shop around before signing for a policy,” she added.
However, consumers could see certain benefits from the new tariff system.
Insurers will now have to provide add-ons that will cover the costs of emergency services in the event of an accident. They will also have to provide policyholders with a replacement car for 10 days (or Dhs300 per day to cover the cost of car rental) after an accident if the policyholder is not at fault.
The new tariff system is also expected to help the struggling UAE car insurance market, which has been facing financial strain amidst increasing competition.
“The UAE’s motor insurance industry has incurred significant losses over the past year,” said Jonathan Rawling, CFO at compareit4me.com.
“However, as a result of the new minimum premium alone, we believe that the size of the UAE’s comprehensive motor insurance market will grow by Dhs136m next year.
“Still, this does not change the fact that consumers will be paying for this growth. Therefore, we advise drivers to not simply accept the price given to them by their current insurer when a policy is up for renewal,” he added.