By Staff writer
New tariffs from the UAE Insurance Authority said to force up insurance costs for thousands of UAE drivers
More than a third (35 percent) of drivers in the UAE will have to shell out more for their fully comprehensive car insurance in 2017 as a result of newly introduced tariffs from the UAE Insurance Authority, according to an analysis from compareit4me.com.
The Middle East financial comparison site said the new tariff system, due to take effect on January 1, will see UAE insurers adopt minimum insurance premiums of AED1,300 for saloon cars, and AED2,000 for SUVs.
The system also sets maximum insurance premium rates of no more than 5 percent of the value of a saloon car, or 7 percent of the value of an SUV.
However, with very few people in the UAE paying more than 5 percent or 7 percent for their insurance premiums (just 0.15 percent in 2016), the biggest effect of the new tariff system will be that people pay more at the lower end of the market.
According to statistics gfrom compareit4me’s insurance comparison platform, 30.86 percent of saloon drivers currently pay less than the new minimum premium rate of AED1,300.
It added that 43.04 percent of SUV drivers currently pay less than next year’s minimum premium rate of AED2,000.
On average, compareit4me said it calculates that affected saloon drivers will have to pay AED114 more for comprehensive insurance in 2017 than they did in 2016 while SUV drivers who will see insurance prices go up by an average of AED428.
Overall, affected UAE drivers will be paying an average of AED262 more for comprehensive insurance in 2017, the website said.
“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. The new tariff system will particularly hurt drivers of vehicles worth AED50,000 or less - 82.8 percent of such people will be worse off,” said Radhika Agnihotri, insight analyst at compareit4me.com.
“By way of contrast, owners of vehicles worth more than AED100,000 are unlikely to pay more than they had previously.”
Agnihotri added that the new tariff system will bring benefits to consumers, too including add-ons that will cover the costs of emergency services in the event of an accident. Insurers will also have to provide policyholders with a replacement car for 10 days after an accident if the policyholder is not at fault.
It is also expected that the introduction of a minimum premium price will partially address the UAE car insurance market’s extended run of financial losses. The past few years have seen insurers savagely competing on price, with many insurance companies "racing to the bottom" in order to preserve market share.