Motorists in the UAE have been having a much easier time lately hunting for a car insurance package as the average prices for premiums have declined.
Experts in the industry have noted that the average cost of premiums has dropped by more than five per cent since the beginning of this year, which can be attributed to an increasingly competitive environment, and the market aligning itself to cater to the more cost-conscious approach being taken by residents in all their purchases.
Avinash Babur, chief executive officer of InsuranceMarket.ae by Afia Insurance Brokerage Services, noted that the mandate by the Insurance Authority, the regulator of insurance in the UAE, had caused minimum premiums to go up in 2017 at the market level.
"Prices also fluctuate based on how insurance companies' individual portfolios are performing. If claims, which is accidents, begin to fall, this would be reflected in the form of lower pricing by the insurers. New entrants and new distribution channels in the UAE insurance industry in recent years can also be attributed to a more competitive environment and a thereby downward pressure on prices," he explained.
According to data recently released by InsuranceMarket.ae and dubizzle Motors, the top five insured car brands in the UAE saw gross premiums declining by an average of eight per cent in the first half of 2018, compared to the same period in 2017.
"Compared with 2017, what has decreased is the premium value," Jorge Bialade, general manager of YallaMotor, told Khaleej Times.
"Customers choose more cost-effective premiums with fewer options and less coverage. There is a difference in pricing across the premiums since they are calculated regarding the value of the vehicle. It depends on the segment, but usually, a larger SUV is more expensive than a sedan. In addition, the cost of repair and the origin affects the value; for instance, American cars are more expensive than Japanese."
Babur revealed that sedan vehicles typically have lower minimum premiums, often starting at Dh1,300 plus VAT; this is the threshold below which the price would not go, regardless of how low the car value goes. SUVs have higher minimum premiums, starting at Dh2,000 plus VAT.
However, for higher-value cars, there may often not be a difference and sometimes SUVs may be able to bag a better rate because they, as per some insurers, tend to be in fewer accidents. There are also several other factors that may impact the price of a specific car insurance policy.
"We've noticed a decline of six per cent in average car insurance premiums for comprehensive policies in 2018, compared to last year," said Ambareen Musa, founder and CEO of Souqalmal.com.
A recent analysis by Souqalmal.com also showed a decline in the number of car insurance applicants opting for policy add-ons like agency repair and personal accident cover, in a bid to keep premiums low. The data also revealed an increase in the number of customers opting for premium garage repair over agency repair, with the former being the more affordable option.
"The average value of cars insured through our comparison platform has also gone down by 15 per cent this year," Musa noted.
"This could signal an increase in popularity of more affordable cars among UAE residents - again a sign of increasing cost-consciousness in light of VAT implementation and rising fuel prices over the past one-year period. Some of the ways that car owners in the UAE can keep their premiums from increasing include cashing in on the 'no-claims discount' which can help policyholders save up to 20 per cent on premiums, raising the policy deductible, cutting back on optional covers, and comparing prices and coverage thoroughly before signing on the dotted line."
News about the drop in insurance premiums was met with relief by the majority of UAE residents, who noted that the recent increase in fuel prices and the introduction of the VAT had caused them to tighten their purse strings.
Faisal Hashmi, a resident in Dubai who recently renewed his insurance contract, noted that he had been using Oman Insurance since 2012 on both his old car, and now on his new vehicle. "My last renewal was around Dh2,600, and I just got it done at Dh2,223, so there was a definite drop in prices for me."
Babur stressed that the best way for a car owner to reduce their motor insurance premiums is to drive safely and build an accident-free record of up to five years. Usually, a five-year 'no claims discount' is a big reduction, but anywhere from one to five years will typically lead to a further discount for each incremental year of no claim made.
The most popular form of vehicle insurance in the UAE, he said, is comprehensive insurance or full insurance, which covers the policyholder's own vehicle as well as its liability to the public, which are referred to as third parties. The alternative to comprehensive insurance is third-party liability insurance, which is the minimum requirement for a car owner to be able to register their car in the UAE. TPL insurance only covers a policyholder's liability to the public, which is if the vehicle causes bodily injury or death to pedestrians or causes damage to third-party property, including other vehicles. Prices for this type of coverage start at Dh750 including VAT for sedans and Dh1,000 plus VAT for SUVs.
By Rohma Sadaqat
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