Dubai: Motor insurance premiums are dropping for all models, bringing relief for car owners in the ═■┐═Ášż║ but will likely dent prospects of insurers. In actual terms, the decline in premiums represents savings of between Dh300-Dh500 for vehicles costing Dh30,000-Dh40,000, and from Dh800 and over for models priced in the Dh50,000 and over range.
ÔÇťIt was about three years ago that the insurance regulator recommended minimum premium for comprehensive motor insurance policies,ÔÇŁ said a senior insurer. ÔÇťFor the better part of last year, nearly all insurers had followed these recommendations ÔÇô but thatÔÇÖs not the case now.
ÔÇťThereÔÇÖs little appetite among the majority of car owners to pay what they as ÔÇťhigh premiumsÔÇŁ. They are taking their business to another insurer who is willing to quote much less.ÔÇŁ
These days, there is a 3.5-5 per cent difference between what the average premiums were for popular models such as the Toyota Corolla and Honda Accord at the start of the year. According to InsuranceMarket.ae data, an Accord could be insured for around Dh1,050 and a Corolla for just over Dh1,000.
But on premium models, such as the Nissan Patrol or Toyota Landcruiser, the differences between a January premium and one written now could be as wide 10-12 per cent. Of course, depending on the insurer.
For many vehicle owners worried about salary cuts or a job loss lurking around the corner, the only intent is to get the motor policy renewedÔÇŽ at a bare minimum cost. More of them are opting for third-party insurance rather than choose comprehensive. (In simple enough terms, a third-party policy only offers cover for damages caused to another vehicle in an accident with your vehicle.)
But when a third-party policy can be had for about Dh600, the cost savings for the car owner become clear.
According to Avinash Babur, who heads InsuranceMarket.ae, ÔÇťThe 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 accidentsÔÇŽ and claims for insurers.
ÔÇťThe COVID-19 sterilisation programme in April restricted movement of vehicles and reduced the overall accidents and claims. This led to a reduction in the premiums by an average of 10-15 per cent. Owners can expect that the post-COVID-19 reduced rates will remain until the end of the year.ÔÇŁ
No quick lift
But many in the industry say that any increase in motor premiums may have to wait longer. ÔÇťIf 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.
ÔÇťInstead, they will keep the rates artificially low and hope this will convince owners to stick with comprehensive.ÔÇŁ
No help from new car sales
New car sales in the ═■┐═Ášż║ are still down by about 30-40 per cent from last year, and thatÔÇÖs hurting dealerships as well as all those insurance companies heavily dependent on their motor portfolios. In a good year, the ═■┐═Ášż║ car would have about 250,000- to 300,000 new units heading out of showrooms.
ÔÇťUnless new car sales recover, insurers will not have much maneuver space in raising motor premiums,ÔÇŁ said an insurer. ÔÇťThey will be reliant on their current motor portfolio, and to retain those clients they will have to keep dropping rates. I donÔÇÖt see any increase in motor premiums unless car sales recover.ÔÇŁ
Insurers kept the sterilisation program in mind and offering generous discounts at the time of motor policy renewals. Existing policy periods are not being extended, but insurers are giving back two months of premiums in the form of a discount on renewal with the same insurer
Less claims, thankfully
Or if there is a sudden surge in accident related claims. Even then, it could be the second-half of next year before these higher claims payout translates into an increase in premiums.
ÔÇťThe ═■┐═Ášż║ Insurance Authority had revised the overall minimum premiums for third-party liability and comprehensive back in 2016,ÔÇŁ said Babur. ÔÇťDepending on the claims history, insurers are generally able to offer additional discounts of up to 30 per cent - provided the insured had a claims-free experience.ÔÇŁ
This year, at least so far, insurers have been shelling out less on accident claims, and that means they can get away with offering lower premiums. But will their luck last?