UAE: Hikes in motor premium rates expected in 2Q
Source: Middle East Insurance Review | Mar 2021
Insurance industry experts and executives expect increases in motor insurance prices during the second quarter of this year, indicating that the current prices constitute the bottom of the price levels.
Emirates Insurance Association (EIA) secretary-general Fareed Lutfi said that motor insurance rates had reached very low levels in recent months, with some policies priced at the minimum tariff levels and others have premiums even falling below that, reported Al Roeya.
He pointed out that the decline in the number of new cars entering the market during the current period will make such pricing practices continue in the first few months of this year.
As an example, a check carried out on several motor insurance websites shows that the premium quoted was less than AED600 ($163.40) for four-cylinder cars before last April, but the same sites promote motor insurance at prices starting at AED450-500 at present.
Mr Lutfi added that it would be likely that insurers would only conclude that there was a need to correct motor pricing during 2Q2020.
EIA Auto Insurance Committee chairman Issam Mouslimani said that motor insurers would compete fiercely during the first quarter of this year to attract more premiums, especially since the current quarter results would be compared with those of 1Q2020, that is, before the coronavirus pandemic spread to the region. He pointed out that some insurers took advantage of the discount system for some categories of vehicle owners as well as commissions that they give to intermediaries, in order to reduce prices.
However Mr Mouslimani said, “Prices are not expected to decrease to lower than they are now, as they are already at the bottom. Many companies have reached below the specified tariff rate.”
Prices remaining at these low levels will push the total insurance premiums and the average insurance premium to decline by between 10% and 20% during the first quarter compared to during the corresponding quarter last year, he explained. Apart from the intense competition, the lower premium volume was due to the decrease in the number of new vehicles entering the market and as a result of the decline in the value of the insured cars at renewal. M
AED1 = $0.27