UAE motorists urged to ensure insurance policies cover flood damage as costs rise

Premiums increased by 20% to 30% as insurers pass on the costs, industry experts say

Dubai was among the worst hit by April's flooding. Chris Whiteoak / The National

Motorists have been urged to ensure their car insurance covers flood damage after many were caught out by the record rain that fell across the UAE in April.

The heavy showers brought much of the country to a standstill, with abandoned vehicles on inundated roads a familiar sight across many of the emirates.

Many car owners were left counting the cost after having taken out policies that did not cover flood damage.

The National spoke to experts who called on car owners to make sure they had the right policies in place as the cost of insurance has increased in the wake of flooding.

Neeraj Gupta, chief executive of insurance comparison website Policybazaar.ae, said more people became worried after the floods and sought to move to comprehensive cover, from third-party policies.

He called on motorists to ensure that the comprehensive policy they decide on covers natural disasters.

In April, the UAE experienced its heaviest rainfall since records first began in 1949.

Homes and roads were flooded, with numerous cars marooned on inundated motorways and flights cancelled, delayed or diverted.

The UAE Central Bank confirmed that damage to vehicles and homes caused by the rain would be covered if there was a comprehensive policy against loss and damage.

“We noticed more people looking for comprehensive insurance after the flooding and avoiding third-party insurance,” said Mohammed Hamadeh, chief executive of Al Ain Ahlia Insurance Company.

Premiums rise

Another consequence of the flooding has been higher premiums for many motorists.

“There has been an increase by 20 per cent to 30 per cent. The floods caused losses for insurance companies as they had a lot of compensations recently,” said Mr Hamadeh.

“It is normal to increase the prices depending on the market conditions.”

The increases follow studies carried out by insurers after the floods, he said.

“Insurance companies are publicly listed and have shareholder funds that must be preserved and protected from losses,” said Mr Hamadeh. “They need to make a profit.”

Insuring electric vehicles, in particular, has become more expensive due to costly repairs to fix EVs damaged by floods.

“In some cases, the insurance cost doubled for electric vehicles as many were totally damaged. In general, the insurance increased by 30 per cent,” Mr Gupta said.

“Other reasons for the increase were inflation, spare parts and labour costs.

“Even before the floods, there was an increase in insurance costs, but the floods added another nail in the coffin.”

Julien Audrerie, executive vice president and head of consumer lines and marketing at Sukoon Insurance, said the increase in premiums was driven by regular inflation and reinsurance costs after the floods.

“On one hand, the frequency of accidents is increasing, with more cars on the road. Spare parts are more expensive and large claims above Dh100,000 more frequent with the general increase in the prices of cars,” he said.

“On the other hand, the reinsurance cost to limit the impact of natural calamities on insurers has rocketed for the entire market.

“Reinsurers lost about Dh500 million on motor insurance alone during the last flood and they now need to recuperate their losses.

“They are now passing this cost to insurers, who have no choice but to pass it to clients.”

His company noticed a 25 per cent increase in premiums, compared with last year, said Mr Audrerie, adding that the market could raise them further to cover the full reinsurance cost.

“But to put things into perspective, clients are still paying less than the pre-Covid prices of 2019,” he said. “Paying less than five years ago despite the inflation, is quite a bargain.”

Counting the cost

Ali Adil, an Iraqi resident of Dubai, was surprised when he was asked to pay Dh6,000 for comprehensive cover on his 2015 Mustang GT.

“My last insurance was around Dh1,700 for non-agency repairs. My insurance is about to expire and the insurance company sent me a renewal quotation for Dh6,000. It is a huge increase,” he said.

With a clean record of zero accidents, Mr Adil, 47, called the insurer asking for a discount.

“I have no claims and nothing related to recent flooding. They told me there was an increase in insurance costs because of the floods,” he said.

“The quotation mentions comprehensive [cover] but disaster or floods are not included. It only covers normal accidents. I’m trying to find lower rates of insurance.”

Mohammed Fathi, an Egyptian resident in Dubai, accepts the increase in premiums but believes motorists without any claims and who were not affected by the floods should be given a discount.

He owns a 2018 Lincoln SUV, and his comprehensive insurance increased from Dh1,200 to Dh1,700.

“I was expecting to have a lower rate of insurance as I have no claims and my car wasn’t damaged because of the floods, but there was an increase. The insurance company told me that it was due to the floods,” Mr Fathi, 45, said.

“I've been driving in Dubai since 2006 and have few claims since then. I thought I would get a good rate due to my history. Good drivers should get a discount.”