The recent fire at the Dubai Marina Torch Tower, one of the tallest residential towers in the area, has sharply brought into focus among residents the oft-ignored aspect of the necessity of home or property insurance, an expert said.
The incident comes just two years after a similar blaze engulfed the Tamweel Tower in another residential area Jumeirah Lakes Towers. The Tamweel Tower fire, which was initiated by a spark from a cigarette butt, displaced around 160 homeowners while also leading to substantial monetary loss for residents.
According to the last reported figures, the repair costs alone for the partially gutted Tamweel Tower ran into almost Dhs78 million. Residents, many of whom had no insurance cover, incurred heavy losses as a result of the fire.
Accidents in residential centres such as Marina Torch Tower and Tamweel Tower also cause a temporary spike in home insurance queries, industry experts say.
“In the immediate aftermath of the Tamweel Tower fire in November 2012, we initially saw sales of home insurance increase dramatically at Zurich, as there was a surge in awareness across the UAE about fire, risk and insurance,” said Zahir Sharif, general manager, UAE at Zurich Insurance Middle East.
“But one year on from that fire we undertook a YouGov survey and found that only six per cent of UAE residents had home contents insurance. Sadly, it seems too many people are failing to heed the warning from these types of tragic events and are not taking the necessary steps to protect their home contents against fire and other potential risks.”
Although the concern created by the accident at the Tamweel Tower did not sustain for long, insurers are hoping the latest blaze will have a lasting effect.
“Following this recent event, we believe that the impact will be more than that of 2012,” said Alison Fenech, head of general insurance at Nexus Group.
“Only yesterday our phones were off the hook with people calling us for explanations and guides about home insurance and how it works.”
Experts say that the absence of a home insurance is not a trivial matter in an emergency such as a fire or other natural calamities as the risks can be quite severe.
“A fire like the one we recently experienced can leave people without homes unless alternative accommodation is provided, which more often than not, it is not fully accounted for,” said Fenech.
“Tenants may have the perception that because their building is insured by the landlord, then their belongings are also covered under the same policy, which is not the case. A fire can destroy as little as furniture and be disastrous as burning a whole building.
“One needs to remember that the time it takes for such buildings to be reinstated and habitable once again is quite long hence they would need to rebuild their lives elsewhere.”
Fenech’s warning painfully rings true in the case of Tamweel Tower, which has yet to complete its renovation post the fire in 2012.
“Home and contents insurance in such an event can help people to replace lost items, while rebuilding their homes and lives and should therefore always be a key consideration when it comes to renting or buying a property,” said Jugal Madaan – chief underwriting officer – commercial lines property, energy, aviation, marine hull & cargo at ADNIC.
A home or property insurance can also help address any third party liabilities in the event of damage, Fenech added.
“Think about the costs if there were casualties, or if the fire damaged neighboring property, or even cars on the street,” she said.
Madaan added: “Home and contents policies will generally not only cover losses due to fire or smoke damage, but all risks, including any liability towards a third party, such as a neighbor or landlord.
“They also generally cover landlords in cases of lost rent, or individuals in the event of a burglary or fatal accident.”
Obstacles To Home Insurance
The UAE’s home insurance penetration rates seem dismal when compared to markets such as the UK, where 76 per cent of residents insure their home contents.
But Sharif said that such low rates could be mainly attributed to a lack of awareness of the benefits of an insurance net.
“There is also a low crime rate in the UAE and fear of crime or burglary is often the main factor in encouraging people to take out home contents insurance – when in fact, threats like fire and flood are far more common,” he said.
In addition, a floating population in the country can also be blamed for low home insurance penetration rates in the Emirates.
“Due to the transient nature of expats, they either forget to purchase insurance or don’t believe they accumulated enough possessions that require insurance – but this is often not the case,” Sharif said.
He emphasised that in the absence of a home insurance, a blaze akin to the Marina Torch Tower could pressure the purse strings of residents, ballooning the already high costs of living.
“Simply ask yourself: how would you replace everything in your home if it was destroyed or stolen? Over time we accumulate items and personal possessions worth tens of thousands of dirhams, such as furniture, appliances, clothing, jewelry and other valuables,” Sharif noted.
“While incidents of crime are very low, we do see many accidents within homes including leaky air conditioning units, burst pipes, electrical fires and sometimes major incidents, such as the fire at the Torch tower. The losses resulting from these incidents can be devastating for individuals and families.”
But with the recent spate of fire break outs at residential towers, are the premiums for home insurance poised to rise?
“A single blaze, such as the one at Torch tower, would not impact home insurance premiums. These tragic events are factored into the cost of the premium,” Sharif added.
However Fenech said that such incidents do cause insurance premiums to rise.
“We need to remember that insurers underwrite risks based on loss experiences,” she said.
“How often do these losses occur? When they do, what is the severity of the impact? These are two fundamental factors amongst other criteria.
“This being said, we do not feel that home insurance in the UAE is as expensive as other markets, and therefore should there be an increase in premiums, the increase will still be affordable by many.”
Also read: Why Dubai Must Prevent Another Tower Blaze