Impact of COVID-19 on Motor Insurance Industry

By PolicyBazaar

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Published: 20 May 2020Last Updated On: 12 January 2021
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The entire world is in the grip of a serious health issue that has affected 4.7 million people worldwide.

Yes, we are talking about the COVID-19 outbreak.

Even before we could realize how serious is the impact of the novel coronavirus almost the entire world was facing the deadly virus. The majority of countries across the globe declared a state of lockdown to prevent the spread of the fatal pathogen.

A major impact of the COVID-19 outbreak, followed by the imposition of lockdown was a sudden dip in the total number of vehicles on the streets. As the number of cars reduced, there was a dramatic reduction in the total number of accidents and car trips.

Now a major question that arises is that, how will insurance premiums be affected due to the imposition of lockdown in the UAE and across the world?

A lot of people started wondering and questioning, why am I supposed to pay the car insurance premium if I am not driving my car?

Furthermore, people who were willing to compare car insurance in Dubai to purchase it, have changed their minds as they are not driving during the lockdown.

But, do they still need car insurance in the UAE?

To answer all your queries and to give you a clearer understanding of all the factors that are responsible for affecting the motor insurance industry in the UAE, we have come up with a detailed thread. Stay tuned and read till the end to find out!

Reduction of Car Insurance Premium

Due to a sudden dip in the total number of vehicles that ply the streets of Dubai, insurance providers are experiencing heavy losses. In order to cope up with their losses, a lot of insurance providers have started to offer heavy discounts/cashback/refunds over their car insurance premium for two months.

Customers willing to buy car insurance during the outbreak can make use of online tools to compare car insurance in Dubai and find out the best provider that is offering the most affordable quote that suits your budget and requirement both at the same time.

On the other, some insurance providers in the UAE have started offering partial refunds to their customers as compensations during the state of lockdown. Primarily from the perspective of a customer reduction and compensation appear to be a lucrative solution to the problem, but in real-time is the right move to make?

Understanding Usage-based Insurance Products

A major issue that has been highlighted mainly due to the current COVID-19 outbreak is how do insurance providers ensure that the payable premiums are fair?

The state of lockdown has been imposed as a preventive measure to contain the spread of the novel coronavirus and is undoubtedly an extremity.

 However, amid our day to day lives, it is quite difficult to asses the driving skills of every insurance seeker.

The COVID-19 outbreak has increased the need for usage-based car insurance plans in the UAE, that determine the payable premium based on mainly two factors that are variable for every single insurance seeker.

The first one is the total number of miles/kilometers the insured vehicle is being driven on a daily basis and secondly, the driving behavior of the insurance seeker.

A lot of car insurance providers have come up with plans that are offered based on the usage of the buyer and the vehicle to cut down the additional expense. By making use of this strategy insurance providers can ensure that they manage to keep generating revenues and at the same time customers do not have to pay anything more than what they are supposed to pay.

Does Lesser Vehicles mean Lesser Risks?

Most of us are in a state of mind that since the number of vehicles on the roads in very low the risks have also fallen substantially. An important point to be kept in consideration here is that the current reduction in the rates of premium is mainly due to the lesser number of people willing to buy car insurance rates. However, it does not account for the driving skills or behavior of the drivers.

According to the statistics, the total number of vehicles that ply on the streets of Dubai has fallen down, but the number of accidents has not gone down proportionally. This is mainly due to the fact that being aware of the fact that there is a lower number of vehicles plying the streets, we tend to drive less cautiously which leads to accidents and collisions.

This clearly concludes that a lesser number of vehicles on the streets does not mean that the risks on the streets have also gone down. Considering all the mentioned factors it is inevitable to compare car insurance in Dubai and choose the best plan to safeguard your car from unexpected events.

In a Nutshell

The COVID-19 outbreak has not just impacted the motor insurance industry but every aspect of mankind and human life. This is, in turn, can be considered as an extremely positive situation for insurance providers to design and develop new and personalized car insurance plans that take care of individual needs and budgets of the customers. The golden thumb rule is to always compare car insurance in Dubai, before purchasing it so as to make sure that you get the best deal.