Motor insurance premiums in the UAE are falling for all vehicle models, and the decline is not expected to bottom out till next year.
The decline in premiums represents savings of between AED300 ($82) to AED500 for vehicles costing AED30,000-AED40,000, and from at least AED800 for models priced at least AED50,000, reported Gulf News.
“It was about three years ago that the insurance regulator recommended minimum premiums for comprehensive motor insurance policies,” said a senior insurer. “For the better part of last year, nearly all insurers had followed these recommendations – but that’s not the case now.
“There’s little appetite among the majority of car owners to pay what they as “high premiums”. They are taking their business to another insurer who is willing to quote much less.”
Many vehicle owners are worried about salary cuts or a job loss and are opting for lower-priced policies. More of them are buying only third-party liability insurance rather than choose comprehensive motor policies.
According to Avinash Babur, CEO of InsuranceMarket.ae, an online insurance brokerage, “The current downward trend on motor premiums will remain until the first quarter of 2021 as vehicle density on the roads build up once again and lead to more accidents… and claims for insurers.
He said that the COVID-19-related lockdown in April restricted the movement of vehicles and reduced the overall accidents and claims. This led to a reduction in premiums by an average of 10-15%. Owners can expect that the post-COVID-19 reduced rates will remain until the end of the year.”
But many in the industry say that any increase in motor premiums may have to wait longer.
“If premiums increase, it will only push more car owners to opt for third-party insurance, and that will have a huge detrimental effect on insurers.
“Instead, they will keep the rates artificially low and hope this will convince owners to stick with comprehensive.”
Meanwhile, new car sales in the UAE remain lower by about 30-40% from last year, and that is affecting insurance companies.
Unless new car sales recover, insurers will not have much manoeuvre space in raising motor premiums, said an insurance executive.