UAE consumers are skipping car insurance add-ons to lower premiums

According to Souqalmal.com, the price sensitivity may leave some consumers with inadequate coverage

Police have repeatedly urged drivers to watch their speed, focus on the road ahead and not to handle phones at the wheel. Courtesy: Dubai Police

Car insurance buyers in the UAE are skipping add-on covers to reduce their premiums, new research from financial comparison site Souqalmal.com revealed on Wednesday.

Just under one in five UAE consumers (18 per cent) who bought policies through Souqalmal opted for the agency repair add-on in 2017 – a feature that allows drivers to have accident repairs carried out by the dealership they bought the car from. This is a significant drop on 2016 when over 42 per cent chose this feature.

Souqalmal founder and chief executive, Ambareen Musa, said a rise in car insurance premiums following the introduction of new car insurance regulations at the start of 2017, coupled with rising concerns about the effects of VAT on the cost of living, had changed how customers shop for car insurance.

“The trend we’re seeing now is that customers are happy to settle for non-agency repair, the cheaper alternative. They are finding it increasingly difficult to justify the additional expense of opting for agency repair,” she said, adding that the increased price-sensitivity towards add-ons may force some consumers to settle for inadequate coverage.

While most insurers in the UAE offer agency repair as a standard benefit for a period of up to three years, car owners can extend this coverage for up to five years as an add-on with an additional premium. Souqalmal said many are now choosing the cheaper alternative of premium garage repair, which still guarantees a reputable service.

Raaed Sheibani of CarSwitch.com, a UAE platform for buying and selling certified used cars, said agency repair beyond the first three years carries quite a hefty premium.

"With all the other costs of car ownership, we hear a lot of our buyers asking to strip out the bells and whistles in insurance and give them a more affordable option," he said. "We don't feel this necessarily means that UAE drivers are under insured, as we have not seen buyers yet veer to further extremes like opting for third-party insurance instead of comprehensive for further discounts."

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Another indication that consumers are taking a more cost-conscious approach is the drop in the demand for personal accident coverage. Only 48 per cent of car insurance buyers on Souqalmal.com selected the personal accident cover for drivers in 2017, compared to 65 per cent in 2016.

This optional feature stretches the car owner’s insurance coverage to include financial compensation if the driver dies or sustains a physical injury in the event of an accident. The maximum compensation under this cover is Dh200,000 for the person insured, across almost all UAE insurers, said Souqalmal.

The research also found that while more customers opted for add-on benefits such as fire and theft cover, roadside assistance, emergency medical expenses and natural calamities cover, fewer wanted to pay for extras such as off-road cover, dent repair, GCC cover and Oman extension.

According to a 2016-2017 analysis of car insurance policies bought through Souqalmal, the average insurance premium for comprehensive plans was around Dh3,000.

Mr Sheibani said buyers are generally more conscious of the rising costs of running a car - from VAT and higher petrol prices to car registration and renewal fees.

“This is influencing purchasing behaviours,” he said. “Buyers are showing rising interest in cars that have better fuel economy, they are negotiating car prices much more aggressively [particularly with the abundant discounts on new cars], they are asking for more options when it comes to financing and comparing interest rates, and are shopping around more aggressively when it comes to insurance."