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Fewer accidents push premiums of car insurance in UAE lower in 2020

By PolicyBazaar

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The car insurance premiums are dropping in the UAE for all car models, letting car owners breathe a sigh of relief. On the other hand, these lowering rates are troubling car insurers. The current trends show that this decline in premium rates of car insurance in UAE is allowing drivers to save somewhere around AED 300 to AED 500 for cars that are priced in the range of AED 30,000 to AED 40,000. While for vehicles that fall in the price range of AED 50,000 and above, the savings can be around AED 800 and more.  

This fall in premium rates has had versatile impacts, for example, the new rules issued by the insurance regulator setting a minimum premium limit for all comprehensive car insurance in UAE in 2017 were followed by most insurance providers up until last year. But the lowered premiums have given impetus to insurers to no longer abide by these rules. The car owners are also changing insurers in the hopes of getting lower premium rates from another. 

Among the many reasons that are behind these dropping rates like the onslaught of COVID- 19, lesser claims, etc, the reduced number of road accidents has emerged as a prominent force behind bringing the premium rates low. 

The statistics indicate there was almost a 10 percent decline in the premiums of car insurance in UAE in the former two quarters of 2019 as opposed to the same duration in the year 2018. Lesser accidents on the roads as well as fewer sales by car companies are recorded to be the major factors behind this decline. 

A closer look at the top five car companies in the UAE saw a massive decline in the premium rates by insurance providers. The average reduction in the rates of Nissan, Honda, Toyota, Mitsubishi, and Ford was 9.5 percent at the beginning of 2020, as compared to the same time period in the year 2018. Let’s take a look at the renewal numbers of premiums for the top cars in the UAE currently, to understand this better: 

Cars

Average Premium Sep- Oct

Average Premium Jan-Feb

The Difference

Toyota Corolla

AED 1006.47

AED 1046.38

3.81 percent

Nissan Patrol

AED 2136.76

AED 2403.98

11.12 percent

Toyota RAV 4

AED 1532.22

AED 1680.70

8.83 percent

Honda Accord

AED 1076.53

AED 1090.97 

1.32 percent

Toyota Land Cruiser

AED 1783.36

AED 2069.60 

13.83 percent

Mitsubishi Pajero

AED 1389.40

AED 1535.54

9.52 percent

The huge savings for the customers is due to the reduced car accidents in all of Emirates in 2020, as well as better insurance distribution. Other than this, the rules introduced by the Insurance Authority of UAE towards no claim bonuses are also responsible for this decline. Safe drivers who have not made a claim in the past year avail of discounts on the premium of the next term. Their claim-free record helps them earn discount bonuses, thus making fewer accidents on the road a notable reason behind the fall in the premium rates of car insurance in UAE. 

The amendments made to car insurance laws in 2017 by the Insurance Authority have given the car owners who drive safely, to enjoy decreased premiums in the range of 10 to 20 percent. Those drivers who have a scot-free record for a whole year get a reduction of 10 percent on their premiums while those who have driven without an accident for two years can claim a 15 percent deduction on their premium rates. Bike riders in the UAE also get a discount of 20 percent if they display a clean record for three years. 

Other Factors: As discussed earlier, there are many other factors that have resulted in a reduction of premium rates of car insurance in UAE.  

  • Reduced Car Sales- Among these, depreciation of car sales is another prominent factor. New statistics show that 9 out of 10 car buyers in the UAE are leaning towards buying a second--hand car model more than buying a brand new one. This trend of purchasing second-hand cars has become more and more common as well as convenient for UAE residents. The prime reason behind this is the lesser cost of second-hand vehicles, allowing drivers to get lower premium rates as well as the new and improved infrastructure.
  • Discarding Comprehensive Insurance- The table above clearly showed the difference in average premium rates to be 3.5 percent to 5 percent for popular car models of Toyota and Honda at the beginning of the year. Premium car models from companies like Nissan however show a wider difference of around 10 percent to 12 percent. Vehicle owners scared of losing employment due to COVID- 19 have no option but to renew their car insurance in UAE at the least possible cost. As a result, they are choosing the TPL or third- party liability insurance over comprehensive insurance. The third-party insurance provides coverage only for damages incurred by the other vehicle during the accident but when it is available for only around AED 600, the choice for the car owner looking to save becomes clear. 
  • COVID-19 -The beginning of lockdown in April restricted the movement of cars and other vehicles thus resulting in fear accidents and hence fewer claims made. This caused a massive reduction in premium rates of car insurance in UAE from 10 percent to 15 percent.
  • Decreased new car sales - Compared to previous years, new car sales in the UAE has dropped down by over 30 to 40 percent. This not only impacts the car dealerships but also the car insurers that rely heavily on it. Without a recovery in the sales of new cars, insurance companies do not have the space to negotiate higher premiums. On the contrary, they might even have to drop the premium rates further in order to retain their customers.

What to expect?

Unless the economy’s recovery from COVID- 19 happens, this current downward slope of premium rates will continue, at least until the first half of 2021. As vehicle density on the road increases and more accidents and claims become common, the premiums for car insurance in UAE will start rising again. 

Furthermore, the increase in premium rates right now will only push policyholders to opt for third- party insurance in these uncertain times of the pandemic, causing a detrimental blow to the insurance companies. Thus, the only alternative is to keep the premiums artificially low, for now, to persuade clients to continue with comprehensive insurance policies. 

The Bottom Line

Those who have car insurance in UAE should take advantage of the low premium rates and opt for comprehensive covers as they offer maximum protection. They provide protection against damages like theft, fire, or accident. They even include third- party insurance, covering all the eventualities of car insurance.