If you drive a sports car in the UAE, we need to talk about the admin of ownership – specifically when it comes to insurance.
Okay, we know, insurance is easily the most boring thing about sports car ownership. But we just happened upon some stats from the guys over at yallacompare, and, frankly, we’re worried.
According to the comparison site, sports car drivers could be drastically under-insured. It analysed average insured values against local dealership prices for used sports cars, and found a massive gulf between the two figures.
For example, if want you want a 2014 Porsche 911 Carrera 4, you’re looking at an average price of AED 346,000 (according to the listings on Dubicars). But yallacompare reckons that the average insured value for the same car is just AED 215,000.
What does that mean? Well it means that people are insuring cars worth AED 346,000 for just AED 215,000.
Yallacompare’s CFO, Jonathan Rawling, said this could be down to the fact that people want to save a little bit on their premiums. After all, the lower your insured value, the less the policy will cost you. What does that mean for you? Well, we’d say that, if you’re tempted to skimp on insured value to save a few dirhams, don’t. If something happened to your car and you weren’t covered for the whole value of it, you could be left seriously out of pocket.
But Rawling also said that the issue might be with insurers. He explained that they might not accept higher valuations to avoid the risk of something called moral hazard.
Now, excuse the insurance jargon, but moral hazard is, basically, when you’ve insured your car for AED 100,000 but you can buy a new one for AED 90,000. This means that, if you write it off, you’ll end up pocketing AED 10,000. This in turn means that you’re, at the very least, blasé about the car being wrecked, and, at the worst, actively considering writing it off.
“An insurer obviously doesn’t want to be in the position where a car is insured for more than it’s actually worth. That immediately exacerbates the moral hazard risk,” said Rawling.
Indeed, Rawling went on to point out that, actually, an insurer would prefer it if your car was insured for less than its actual value. That means you’re heavily incentivised to drive carefully and take all measures to not write the car off (even subconsciously).
So what do you do about this? Well, again, we’d say that your priority should be to insure your car for its actual value. If an insurer doesn’t accept that valuation, move on to another one.