Motorists in the UAE will pay more for their car insurance from January 1 when new tariff rates are introduced and companies pass on the cost of ambulance services and courtesy cars to customers.
New maximum and minimum premiums will be set for third-party and comprehensive policies, depending on vehicle type, reported The National.
The UAE Insurance Authority has issued a new vehicle insurance tariff system, on which premiums are based. The new regulation, effective from January 1, 2017, supersedes an existing circular that has been in place since 1996, the report said.
“It’s pretty straightforward,” Frederik Bisbjerg, executive vice president of Mena Retail at Qatar Insurance Company, reportedly said. “The insurance regulator has given us parameters to work with so we have to set limits under the scheme. The minimum has been increased, which is good for the insurance companies because there has been a lot of competition, especially for cars of lesser value.”
The new system includes unified motor vehicle insurance policies against third-party liability and against loss and damage, said the news portal.
The tariff will include additional bolt-on premiums to cover the cost of ambulance services and medical evacuation to hospitals, it said.
“Across the board, everybody will have to pay a somewhat higher premium because we insurers have to offset the ambulance fees, which we’ve already done, and the 10-day replacement vehicle,” Bisbjerg was quoted as saying. “This is part of building up the reserves of insurance companies so we can pay for the claims that we are obligated to do.”
It will be mandatory for insurance companies to give policyholders compensation equivalent to the cost of a replacement car after an accident for a maximum of 10 days or pay out up to Dh300 per day for a rental, reported The National.
“Most chief executives at insurance companies have welcomed stricter regulations on motor insurance,” said Pascal Persoon, chief executive of eData Management Solutions in Dubai, which developed risk-management software for the insurance industry. But they fear premiums will go up.
A replacement, or courtesy, car – or cash for a rental – is sometimes provided when a vehicle is being repaired but until now this has been entirely dependent on the type of policy and the insurer, the report pointed out.
“Imagine paying out Dh300 a day for 10 days, which is already Dh3,000 for someone with a comprehensive insurance,” he reportedly said. “The other issue is insurers don’t have their own vehicles to replace cars involved in accidents.”
The authority reportedly retained the maximum premium for policies against comprehensive liability and against loss and damage for saloon cars at 5 percent. It is unclear whether the maximum rate of 5 percent will also apply to sports cars.
“The new tariff system is fair but the only thing I’m worried about is if a saloon car is a high-performance vehicle, such as a super sports car, valued at Dh3 million to Dh4 million,” Bisbjerg said. “I’d be worried to insure it for a 19-year-old kid at 5 percent.”
Persoon reportedly agreed it was a grey area under the new guidelines.
“Regardless of the history of the driver, it’s 5 percent, which should not be the case,” he was quoted as saying. “In the UK or US, if you cause an accident that is quite severe, the premium directly jumps to 8 to 9 percent.”
The minimum premium for a comprehensive insurance policy for a private saloon car is fixed at Dh1,300, and Dh2,000 for 4×4 vehicles, reported The National.
The minimum premium for a third-party liability insurance policy for a four-cylinder private saloon car will be Dh750, while the maximum amount will be Dh1,300, the report said.
The premium increases based on engine capacity with a minimum of Dh1,300 for an eight-cylinder saloon car to a maximum of Dh2,100.
For a four-cylinder 4×4, the minimum and maximum premiums will be Dh1,000 and Dh1,750, respectively, said the news portal.
Under the new rules, insurance companies are allowed to quote prices based on technical or actuarial information, but cannot levy or charge additional amounts without a resolution by the Insurance Authority.
Under the new guidelines, good drivers will continue to obtain discounts on their insurance premiums and drivers with poor records will be made to pay more, the report said.
