Motorists in the UAE are facing a steep rise in car insurance premiums this year, with costs surging by up to 40% in recent months. Industry experts attribute this increase to extreme weather events, higher claims, and rising repair expenses.
The UAE experienced unprecedented rains and widespread flooding earlier this year, particularly in April, causing severe damage to vehicles and triggering a surge in insurance claims. Mahesh Balani, Chief Operating Officer at Insurancemarket.ae, explained that the removal of COVID-era discounts in Q3 2023 further exacerbated the rise. These discounts, which previously offered up to 50% off comprehensive insurance premiums, were phased out as claims inflation continued to grow.
“The impact of extreme weather, including the February hailstorm and April floods, forced insurers to adjust their pricing models to reflect rising costs,” Balani said. Vehicle damages caused by flooding, such as engine failures and water-related issues, have driven insurers to cover significant repair and replacement expenses.
Impact on Rent-a-Car Businesses and Consumers
The rising premiums are particularly challenging for rent-a-car businesses. Hassan Khursheed, CEO of 7Cars Rent-a-Car, reported a staggering 200% increase in insurance costs for his rental fleet. “Previously, we paid about 2% of the car value for insurance, but since mid-2024, this has jumped to between 7.5% and 8.5%. It’s putting immense financial strain on us,” he noted. Khursheed added that personal vehicle premiums have also surged, citing his own experience with rates doubling from AED 1,500 to AED 3,100 for his sports car.
Individual motorists are also feeling the pressure. Ramesh K.H., a student in Dubai, saw his premium jump from AED 1,400 to AED 2,400 in November, while Dubai resident Imran Ali Jan paid AED 1,700 this year, up from AED 1,200 last year, despite his car’s depreciation.
Insurer Insights and Market Drivers
Julien Audrerie, Executive Vice President at Sukoon Insurance, highlighted unprofitable results in motor insurance as a major reason behind the rate hikes. “During the COVID period, premiums were reduced significantly, but as vehicle usage returned to normal, accident rates climbed, adding further strain on insurers.”
Audrerie also cited a 10% increase in repair costs due to inflation and weather-related claims as factors driving up premiums. He stressed the importance of choosing insurers with financial stability and reliable customer service, cautioning against overly cheap policies that may not provide adequate coverage.
Premium calculations, he explained, depend on factors such as accident risk and repair expenses. For instance, repairing high-end German vehicles at authorized dealers is far costlier than fixing Japanese cars at local garages. Insurers with advanced pricing models assess individual risk profiles, while others use flat rates, which can unfairly distribute costs among policyholders.
Outlook for 2025 and Beyond
Experts predict that car insurance premiums will continue to rise in 2025. Balani anticipates further increases due to ongoing claims inflation, repair cost hikes, and recurring extreme weather events. Audrerie echoed this sentiment, estimating premiums could climb by over 10% next year as insurers adjust to maintain profitability.
As the UAE grapples with these challenges, motorists are urged to choose their insurance providers carefully, prioritizing stability and reliability to ensure adequate protection during future claims.
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