Driving is a relatively cheap activity in the UAE: cars are inexpensive by world standards, the cost of mechanics is generally reasonable and, of course, the cost of petrol is much lower than the global average. One exception to this is the higher than average cost of car insurance, where a lack of sharing of drivers’ histories often inhibits insurance companies setting premiums in a way that reflects the individual risk each driver poses.
Premiums are based overwhelmingly on the value of the car rather than being balanced against the driver’s record, meaning in effect that the good drivers subsidise the bad or reckless ones. Fortunately, it seems all this is about to change.
As The National reports today, about 60 per cent of motor insurance companies in the country will soon have access to a shared database to track drivers’ accident histories, enabling them to charge fairer premiums and prevent insurance fraud. This effectively means safe drivers will be rewarded while bad ones will be penalised with higher premiums, as happens in many other countries.
This move should have a wider effect than merely on bank balances. Evidence elsewhere in the world suggests that when drivers know that their insurance premiums will reflect the way they drive, it has a psychological impact prompting them to be more careful. That results in fewer road casualties, and therefore fewer medical expenses and compensation.
In the UAE, which as The National has reported is beginning to make significant inroads into its road toll, this carrot-and-stick policy will provide one more safety strategy.
Personalised insurance premiums will add to the existing emphasis on factors such as enforcement and education. Safe drivers can expect good news when they renew their insurance, bad drivers will have a strong incentive to improve their performance and terrible drivers might find themselves unable to get insurance at all.
