The cost of car insurance in the UAE has surged by as much as 40 per cent on some models as motorists are forced to look at cheaper third party policies, according to a new study.
Motor insurance has risen by an average of nearly 15 per cent since January, says comparison website compareit4me.com.
Drivers are paying an average of 14.88 per cent more for their fully comprehensive car insurance in 2017 than last year after the UAE Insurance Authority introduced minimum premiums, says the website.
Under the new rules, UAE insurers must adopt minimum comprehensive insurance premiums of Dh1,300 for saloon cars and Dh2,000 for SUVs, while the minimum caps for the amount of money paid out in the event of an accident have also risen.
The website’s researchers analysed data from hundreds of insurance policies sold in the UAE in January and February 2017 and compared them with policies for similar vehicles sold a year earlier.
They found that drivers owning SUVs valued at less than Dh50,000 and buying comprehensive insurance have been hit the hardest, with premiums rising by an average of 40.59 per cent – equating to Dh618 - compared with 2016.
Drivers of saloon cars worth less than Dh50,000 are paying an average of just 9.53 per cent more for their fully comprehensive policies than they were in 2016, equating to an increase of Dh131.
“It seems that insurers have taken the new tariffs as an opportunity to raise prices across the board – not just on policies valued at below the new minimum premiums,” said Jonathan Rawling, chief financial officer at compareit4me.com. “Because insurers don’t yet know how much these extra protections will cost them, it makes sense that they have raised prices for everyone.”
At the same time Compareit4me.com reported that the number of customers buying third party policies rather than fully comprehensive insurance had doubled during January and February 2017 compared with a year earlier.
“This may suggest that more UAE residents are being driven towards third-party coverage, having been priced out of the ability to secure fully comprehensive policies. If this trend continues, we may see a situation in which the least affluent people in the UAE are left with inadequate financial protection,” Mr Rawling added.
The increase in motor insurance is the latest blow for consumers who are being hit by rising costs with more expected to follow after the introduction of value added tax next year.
Last week Statistics Centre Abu Dhabi reported that its consumer price index for February rose by 2.1 per cent compared with the same month the previous year as higher fuel and utilities bills pushed up prices.
Experts predict that the rate of inflation will continue rising throughout 2017 and spike next year with the expected introduction of VAT.
“For 2017 we expect that the main driver of inflation will be the higher fuel prices, this will especially be the case in the first quarter. We expect annual average inflation to average around 2.4 per cent in 2017 for the UAE,” said Monica Malik, chief economist at Abu Dhabi Commercial Bank.
“We see inflation accelerating to around the 3.7-4 per cent level in 2018, with the introduction of VAT. The rise in prices should result in a softening private consumption in 2018,” she added.