Wednesday 11 Sep 2024 Abu Dhabi UAE
Prayer Timing
Today's Edition
Today's Edition
Business

Car insurance prices up 20% in 2023

Car insurance prices up 20% in 2023
14 Dec 2023 10:17

YUSUF AL ARABI (ABU DHABI)

Car insurance policy prices have increased by approximately 20% in 2023 compared to 2022. This rise is attributed to the economic recovery, heightened demand for new cars, and insurance companies’ efforts to boost their net profits, experts and officials in the sector noted.

They explained to Aletihad that this price hike is a necessary corrective measure to establish sound competitive practices, enhancing insurance companies’ net results in the country.

This increase is also expected to improve service quality and reduce disputes between companies and policyholders, while bolstering insurance companies’ capacity to meet their obligations towards policyholders, agencies, and repair workshops. There is an anticipation of continued rises in both comprehensive and third-party car insurance policy prices, potentially reaching pre-COVID levels.

Nasr Abdul Rahman, from the Motors Insurance Technical Sub-Committee at the Emirates Insurance Association, reported a notable improvement in car insurance policy prices this year. This followed a directive from the Central Bank of the UAE (CBUAE), mandating insurance companies to adhere to minimum price limits and discontinue offering 50% discounts. He said that the CBUAE’s decision aligns with insurance companies’ strategy to enhance technical profits from car insurance, countering the recent trend of declining profits due to unhealthy competition. He highlighted a 50% increase in average car repair costs at insurance companies relative to premiums collected, indicating previous non-technical pricing strategies. A group of leading insurance companies has been gradually increasing prices, expecting continued improvement in the insurance market.

Saeed Abdullah Al Muhairi of United Gulf Insurance Brokers, confirmed a roughly 20% increase in vehicle insurance policy prices in 2023 compared to the previous year. This increase corrects the significant price drops experienced during the COVID-19 period, when companies often offered discounts up to 50%. The correction addresses the unsustainable nature of these discounts and their contribution to significant technical losses for companies. The price adjustment is seen as a step towards enhancing service quality and reducing disputes between companies and policyholders, while also strengthening the companies’ abilities to fulfill their responsibilities.

George Maroun, General Manager of MMI Insurance Agents, noted that comprehensive car insurance policy prices have risen variably in 2023, with most increases occurring in the latter half of the year. This follows the CBUAE’s directive to end the 50% “COVID-19 discounts”. Insurance companies are now more selective in their underwriting policies, avoiding policies for rental cars and tightening repair timelines at agencies. Maroun emphasised that these price hikes and policy adjustments are vital for establishing healthier competitive practices and improving insurance companies’ net results.

An unnamed director of an insurance brokerage company mentioned that the average insurance price for sedan and four-wheel-drive cars reached 1.8% of the car’s total estimated value by the end of this year, up from 1.5% last year. The comprehensive insurance prices for these cars, with agency repairs, ranged between 3% to 3.5% of the car’s value this year, compared to about 2.5% last year. For rental and delivery cars, the estimated insurance rate stood at about 2.5%, with a minimum of Dh1300, due to their high-risk nature from intensive usage. Conversely, luxury car insurance prices, for cars valued over Dh500,000, have stabilised at 1.25% of the car’s total value this year, slightly up from 1.15% last year.

The UAE’s insurance sector comprises 60 companies, including 34 national and 26 foreign firms, with 11 national and two foreign companies practicing all insurance branches.

Copyrights reserved to Aletihad News Center © 2024