UAE: Price war in motor insurance market
Source: Middle East Insurance Review | Aug 2023
Some insurance companies are selling motor policies at lower premium rates, with discounts exceeding those stipulated under the unified motor insurance policy, according to industry experts.
They warn that this practice would result in the motor branch incurring huge losses that would affect the insurers’ ability to cover claims adequately and at an appropriate time, due to insufficient premium income, according to Emirates Today which cited the experts.
The head of the accident department in a domestic insurance company, who preferred not to be named, said, “It is known that there are insurance companies that are selling vehicle insurance policies at less than the minimum set by the Central Bank, according to the unified insurance policy in force since 2016.”
These insurers are violating the pricing policy because they need cash flow. He said that insurers are allowed to grant a discount of a maximum of 30%, in line with stipulations in the standard motor insurance contract. The unified policy states that the discount rate is 10% when a motorist is accident-free during the previous insurance year; 15% for the previous two consecutive years and 20% for the previous three consecutive years. In addition, a 10% loyalty discount can be given to customers for annual renewals with the same insurer.
Insurance expert Fouad Salem said, “These practices bring back the phenomenon of price undercutting, which had disappeared since the unified policy came into force in 2016.” M