UAE consumers are being urged to take advantage of no-claims discounts on their car insurance in Dubai, Abu Dhabi and other Emirates, following amendments to the country’s insurance regulations that came into force at the beginning of 2018.
Given the lack of sophisticated pricing methodologies among the majority of insurers in the UAE, the regulator has stepped in to mandate the inclusion of driving history when determining quotes, according to Jonathan Rawling, CFO of yallacompare, the Middle East’s leading comparison site.
“Many insurers do not adjust the premium at all based on your previous driving experience – regardless of whether or not you have a no-claims certificate, which states you haven’t made a claim on your car insurance, and are therefore less risky to insure. It’s one of the most obvious examples of a relative lack of pricing sophistication in the Middle East’s insurance industry,” Rawling said.
“The UAE Insurance Authority has recognised the issues with this, and in its latest regulation amendments, has mandated that insurers can give discounts for drivers who haven’t claimed on their policies and want to renew.”
The amendments to the new tariff regulations announced last year state that those with claim-free insurance records are eligible for discounts of up to 20% on their renewals. Crucially, the new rules also say that insurers are obliged to provide no-claims certificates to their customers free of charge.
“Under the previous regime, insurers would traditionally charge their customers an administration fee for providing a no-claims certificate. We are aware that some insurers are still charging for these certificates. If you encounter this, we’d point you towards the UAE Insurance Authority website to lodge a complaint,” said Rawling.
“Under the new rules, if you haven’t made a claim, you have a right to a free certificate to prove it. Your insurer is also now obligated to give you a no-claims discount if you’re renewing and you haven’t claimed in a year or more.”
While the amendments encourage renewals by enforcing no-claims discounts, it is expected that the new rules will also encourage competition. To win the business of safe drivers, other insurers may well adjust their prices to accommodate no-claims discounts, so long as safe drivers can provide their no-claims certificates.
“This will give the insured more freedom to move if they choose to,” said Rawling.
The new regulations also bring in possible discounts for coverage on motorbikes and electric vehicles. Benefits for fleet owners are also included in the amendments.
“These measures are an important first step on the journey towards fairer pricing. However, there are still further improvements that can be made. Most pressing, we think, is the need to include distance driven in any insurance premium calculation,” said Rawling.
“The one example we always use is that, all other things being equal, a person driving to Abu Dhabi and back every day will pay the same amount for insurance as someone driving between Dubai Media City and Dubai Marina every day. That means the person doing the short journey is effectively subsidising the risk of the person driving hundreds of kilometres every day.”
Some UAE insurers are taking positive steps towards more sophisticated pricing methodologies. One or two have begun investigating the use of a mobile phone app that monitors driving styles. Those that agree to run the app while driving, to prove they are safe drivers, can benefit from enormous savings on their premiums.
“This is a welcome development, and on par with what we’re seeing from some of the more advanced insurers in Europe,” Rawling said.