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July 31, 2017 | 13:00 | Dubai
UAE drivers are currently paying an average of 13.6% more for their fully comprehensive car insurance policies than they were last year, according to an analysis from yallacompare.
The price increase is down to new tariffs introduced by the UAE Insurance Authority at the beginning of 2017. For fully comprehensive policies, the tariffs set new minimum premiums of AED 1,300 for saloon cars, and AED 2,000 for SUVs, bringing prices up for the majority of UAE drivers.
As was the case in March 2017, when yallacompare (then under the brand name compareit4me.com) conducted its last study on the average cost of fully comprehensive insurance policies in the UAE, drivers of low-value SUVs are the worst affected group. Insurance prices for SUVs worth less than AED 50,000 are now an average of 37.4% higher than they were last year, compared to the 6.36% increase seen by drivers of saloon cars worth less than AED 50,000.
“Insurers have adjusted their pricing methodologies over the course of 2017 to deal with the realities of the new tariffs, and it would appear that many drivers have been able to carry on without paying too much more than they were last year. However, drivers of inexpensive SUVs have seen fully comprehensive insurance prices skyrocket over the past 12 months, with the new minimum premium rates being the main driver of that,” said Jonathan Rawling, CFO of yallacompare.
“Elsewhere, most drivers are only paying around 10% more for their fully comprehensive car cover than they were last year. The only other group to see a price increase much larger than that was drivers of saloons worth between AED 100,000 and AED 150,000, who are now paying just over 14% more than they were in 2016.”
More statistics on the average costs of UAE car insurance policies are available on request.
Six insurance myths busted
Did you know that Oman coverage on a UAE insurance policy does not necessarily mean that you’re legally entitled to drive in Oman? And did you know that personal accident cover will not cover your medical bills in the event of an accident?
To increase consumer awareness about the types of cover that UAE residents can expect from their policies, Jonathan Rawling, CFO of yallacompare, busts six myths about car insurance in the UAE. Rawling’s career spans over 20 years in the insurance industry, including several as CFO of Zurich Insurance in the Middle East and Turkey.
“When you tick the box for additional personal accident cover when purchasing car insurance, you may assume that this will cover your medical bills in the event of an injury resulting from a car accident. Unfortunately, personal accident cover only amounts to lump-sum payouts in the event of very specific injuries,” explains Rawling.
“If you lose your life in a car accident, your personal accident cover will typically award your family up to AED 200,000. In the event of blindness, you’ll typically be eligible for up to AED 100,000 per eye, and if you lose a limb, it’s AED 50,000 each. These are one-off payouts that are given to you in a lump sum once a diagnosis has been confirmed. As a result, you can’t simply show a copy of your policy document at the hospital if you’re injured during an accident – you’ll have to rely on your health insurance policy to cover your medical care.”
“GCC-wide cover is a common feature of most gold car insurance packages, but what most people fail to realise is that this type of cover doesn’t actually allow you to legally drive in another GCC country. What this feature offers is protection against ‘own damage’ – i.e. damage to your car that you’re responsible for. For example, if you hit a tree in Oman, you can claim back the cost of the repairs that are needed from that,” Rawling says.
“However, with this sort of cover, you’re not insured for third-party damage, which is what makes driving in another GCC country with no other type of cover illegal. In the insured/insurer relationship, you’re the first party, the insurer is the second party, and the third party is whoever you may hit in an accident. So if you’re in Oman and you hit someone else in an accident, your UAE policy with GCC-wide cover won’t cover the damage to the third party’s car. It’s not legal to drive without that basic cover in any country. This means that, if you’re going on a road trip to another Gulf country, you should buy basic cover from a local insurer at the border.”
“Another common misconception about motor insurance in the UAE is that your fully comprehensive policy will cover the costs of mechanical repairs in the event that your car breaks down. Unfortunately, that isn’t the case. The job of the insurer is to, in the event of an accident, return your car to the state it was in when the policy was issued. This means that mechanical repairs may be covered if they’re needed after an accident,” Rawling explains.
“What’s not covered, though, are general mechanical repairs that are needed if your car breaks down or has fallen into a state of disrepair. For that, you’ll need a warranty, which may be included when you buy a new car, or can be purchased from your dealer. Either way, it’s important to remember that your insurer isn’t responsible for your car’s general maintenance.”
“It’s always tempting when buying a new car to have the dealer arrange everything for you. You simply pay your deposit, fill out some forms, and the dealer will take care of the finance, insurance and registration for you. But insurance is one thing you should keep under your own control, as the margins that dealers charge on these insurance policies are out of this world,” Rawling warns.
“As an example, one of our colleagues recently bought a new car, and the dealer offered to arrange insurance as part of the registration process. But the quote for that policy came in at around AED 9,500 – a good AED 4,000 more expensive than the quotes we could provide on our website for the same car of the same value. Naturally, our colleague said no thanks to dealer, and arranged insurance himself through us.”
“One of the most sought-after features for fully comprehensive policies is agency repair, which means that, if any repairs are needed for your car after an accident, the insurer will pay for the official dealer of your car to carry out these repairs. The problem with this, of course, is that policies featuring agency repair tend to be more expensive than non-agency repair policies,” says Rawling.
“The thing is, if we assume that, in the event of an accident, it is the insurer’s responsibility to return your car to the state it was in when the policy is issued (and it is), do you really care about where the spare parts come from? There are plenty of good non-agency repair offerings – you can even opt for a premium garage add-on – meaning that, unless you’re driving a supercar for which spare parts are hard to come by, you shouldn’t see many issues with a policy that doesn’t offer agency repair. Indeed, you should really question whether or not the added cost of an agency repair policy is worth it.”
“It may be tempting to insist to your insurer that your car is worth more than the number it has been valued at, but in reality it’s not correct to value the car at the number you bought it for. Firstly, if you’re insuring a car at a higher value, you’ll end up paying more for your policy, and secondly, the car value mentioned on the policy document only comes into play in the event of a total loss – which is a rare occurrence,” Rawling explains.
“But the really big thing that people fail to realise about their car valuations is that, from your insurer’s point of view, the value of the vehicle decreases over the course of the year. So what really matters is not the value of the car when you bought it, but rather the value of it today – in its current state. When your policy starts, you may have your car valued at AED 100,000, but after three months, that value will have dropped slightly, and it’ll drop again in the following three months. This means that, if you write off your car during the last three months of your policy, you won’t get the quoted amount back as part of the insurance payout.”