Blog

Considering all the models out there, there has been a drastic drop in the motor insurance premiums irrespective of the model types. This decline has seen savings of up to Dh300-Dh500 for vehicles that cost around Dh-30000-Dh400000. However, the insurers can eventually notice the fact that lower claims won’t ultimately benefit them.

Almost three years ago, there was a recommendation by the insurance regulators for a minimum premium regarding comprehensive motor insurance policies. This was also followed for till the last year, but with the rise of the COVID-19 global pandemic, things have taken a sharp turn. This has resulted in little eagerness from most car owners on paying their insurance premiums, especially for higher premiums. As a result, they are more than willing to approach a third party insurer who is ready to provide a much lower costing insurance premium. So what resulted in this sudden drop in motor insurance premiums?

As a method to ditch comprehensiveness

Nowadays, the car industry has seen some differences ranging around 3.5-5 percent in their average premiums. These include popular brands like Toyota Corolla and Honda Accord. This can be observed in a more sharpening contrast if one views the premium models like the Nissan Patrol or Toyota Landcruiser, wherein the difference is as much as 10-12 percent.

One of the sudden drop objectives was to make everybody enabled for the car premiums, whether they are having a salary cut or on the verge of losing their jobs. This has also seen a rise in third-party insurance rather than comprehensive insurances. The COVID 19 sterilization program helped for further reduction of the cost by an average of 10-15 percent. And these dropped rates are expected to be there till the end of this year.

Quick lift isn’t an option

Experts have speculated that the car industry will have to wait a bit longer before they can go for an increase in their motor premiums. This is to prevent the shift of motor insurance premiums to third party insurances, resulting in a detrimental effect on the insurer. This is why the drop-in rate was observed to convince the owners to stick with comprehensive.

Purchase of new cars won’t create any differences

There has been a drop in the purchase rate of new cars in the UAE. The decline has been by 30-40%  compared to last year, which has become a significant problem for both the vehicle and insurance companies.

It is predicted that unless there’s a turnaround of new car sales in the UAE, it’s challenging to go for a maneuver space in raising the motor premiums. Thus they will have to rely on their current motor portfolio and try to hold onto their clients to prevent the successive dropping rates.

It can result in a decrease in car insurance claims

Sometimes there can be a sudden surge of insurance claims due to an increase in accidents. This can increase insurance premiums. Although due to the effect of COVID-19 and various vehicle rules and precautionary steps taken by the Government around the world, this has dramatically been avoided. As a result, most experts estimate that it’s not till the second half of the next year that one can observe the rise in higher insurance claims payout; thus, an increase in premiums inevitably.

In 2016, the UAE Insurance Authority revised its entire minimum premiums regarding third-party liability and comprehensive. Based on all the claims histories of the past, the insurers could go for an additional discount of up to 30 percent. Although there was a condition – the insurer had a claims-free experience.

This is why deep into the year ending; there have been fewer sell-out accident claims by the insurers. This implies the fact that they can offer lower premiums and avoid extra payments. But how long will their luck last?