FNC member calls for cancellation of minimum rates for car insurance

FNC member Hamad Al Rahoomi asked the Minister of Economy about the logic behind the government's cancellation of minimum rates for vehicle insurance.

FNC member Hamad Al Rahoomi questions the Minister of Economy about the newly-introduced minimum rate for car insurance during an FNC meeting in Abu Dhabi on Tuesday. Delores Johnson / The National

ABU DHABI // Authorities should cancel a newly-introduced minimum rate for car insurance, a Federal National Council member said on Tuesday.

Dubai member Hamad Al Rahoomi questioned Sultan Al Mansouri, Minister of Economy, about the logic behind the new rule, which went into effect on January 1 and set minimum rates of Dh700 for partial insurance and Dh1,000 for full insurance.

Mr Al Mansouri said 16 out of 61 insurance companies have had major losses, while investments had reached Dh39 billion in 2015, showing some growth in the field.

Compensation paid out by car insurers reached more than Dh4.7bn.

It was therefore important to unify insurance procedures, especially because more than 90 per cent of complaints filed to the authority related to vehicle insurance, said Mr Al Mansouri. Last year, 6,755 complaints were filed.

Unifying the procedures also involved making it mandatory for companies to follow international practices and fully compensate for lost vehicles, he said.

The maximum amount a company has to pay per accident was increased to Dh2 million.

Mr Al Rahoomi argued that the Government should not be protecting companies on behalf of clients, saying “the country has supply and demand in all areas” and calling it strange for the Government to set minimum rates for companies when they can offer lower ones.

“Setting rates is up to the company’s policy and competition between companies benefits everyone,” he said. “It is not the Government’s role to ensure companies’ profit margin.”

Mr Al Mansouri said it was necessary to consider the tourism and insurance sectors and identify rates to avoid a major increase in prices by some companies.

“We don’t want the market to be monopolised,” he said.

However, he said the UAE Insurance Authority would meet in March to evaluate the efficacy of the new regulations.