Abu Dhabi, UAEMonday 25 May 2020

How to save on your car insurance during the coronavirus crisis

The UAE Insurance Authority has urged insurers to offer reductions of up to 50% as residents drive less

Illustration by Mathew Kurian
Illustration by Mathew Kurian

With the majority of UAE residents staying at home during the coronavirus pandemic, the absence of work and school commutes has reduced driving to almost zero.

Fewer cars on the road means accidents decline and costs for insurance companies fall. So are insurers passing on those savings to customers?

“From flat discounts on car insurance premiums and 'one-month free' offers on annual premiums to discounts on partner companies’ services, insurance companies and aggregators are launching lucrative deals to ease some of the financial burden on UAE residents,” says Ambareen Musa, founder and chief executive of financial comparison website Souqalmal.com.

I’m expecting some insurers to lower prices even further, because the market is generally competitive anyway.

Hitesh Motwani, chief marketing officer of InsuranceMarket.ae

The UAE Insurance Authority amended motor insurance policy regulations on April 22 to give companies the power to reduce the minimum insurance premium it stipulates by up to 50 per cent for frontline workers and other specified categories.

Those eligible for discounts include workers in the healthcare sector, members of the armed forces, police and civil defence, people of determination, the elderly, and individual insurance applicants who have accident-free records.

Insurance companies can either refund part of the premium or reduce it when renewing the policy, “taking into account that the refund or reduced amount should be in proportion to the periods of sterilisation issued by the competent authorities”, the IA said in a statement on its website.

The IA also said companies have the option to “change the calculation of premiums of new or renewed policies by linking the premium with the number of kilometres driven” as per the insured’s “wish”.

A sign on Sheikh Zayed Road warns motorists to stay home during the 24-hour lockdown of Dubai in April. Antonie Robertson / The National
A sign on Sheikh Zayed Road warns motorists to stay home during the 24-hour lockdown of Dubai in April. Antonie Robertson / The National

Some car insurance providers, including Oman Insurance, Union Insurance and Watania, have rolled out offers on existing and new policies on their own initiative or in line with the IA’s recommendations. However, insurance experts say the market is still evaluating the situation and widespread and long-term actions have yet to come to fruition.

“The IA's latest guidelines do talk about an easing of the minimum requirements in terms of price on insurance providers. Whether or not insurers will adopt it is left to see,” Ms Musa says. “Changes in prices and product structures do take some time to get on to the market after such circulars.”

Hitesh Motwani, chief marketing officer of InsuranceMarket.ae, says many car insurance providers are giving the 50 per cent discount to frontline workers, but on a “case-by-case basis”. Some insurers are reducing premiums by 20-30 per cent for customers who have had no claims, or offering one-to-two months free.

“I’m expecting some insurers to lower prices even further, because the market is generally competitive anyway,” Mr Motwani says.

Hitesh Motwani, chief marketing officer of InsuranceMarket.ae, says many car insurance providers are giving the 50 per cent discount to frontline workers, but on a 'case-by-case' basis. Photo courtesy InsuranceMarket.ae
Hitesh Motwani, chief marketing officer of InsuranceMarket.ae, says many car insurance providers are giving the 50 per cent discount to frontline workers, but on a 'case-by-case' basis. Photo courtesy InsuranceMarket.ae

Car insurers worldwide are struggling to decide whether to refund customers, as they come under increased pressure to provide financial relief to drivers in accordance with decreased time on the road.

Allstate, one of the largest US auto insurers, said on April 6 it would return more than $600 million (Dh2.2 billion) in premiums to customers as many Americans were driving about 40 per cent to 55 per cent less due to stay-at-home orders.

Other major US insurers, including Geico, State Farm and the United Services Automobile Association, have also issued rebates to car insurance customers.

In the UK, Admiral was the first insurer to offer motorists refunds, giving drivers back £25 (Dh112) each in a total package worth £110m.

Following the decision, a group of MPs wrote a letter to Chancellor of the Exchequer Rishi Sunak, urging other firms to follow suit. The letter stated that driving is down by 75 per cent and car insurers reported an almost 50 per cent drop in claims during lockdown.

By Miles, a car insurance provider that charges based on mileage, claims that UK auto insurance companies are set to make a £1bn profit through the pandemic as claims decrease.

In new regulations that came into force on Monday, the UK’s Financial Conduct Authority asked insurance and premium finance firms to reassess the risk profile of customers, consider offering products with lower premiums, and waive cancellation and other fees associated with adjusting customers’ policies.

The FCA’s guidelines are similar to those of the IA in the UAE in that they are optional. In the UAE, however, Mr Motwani says he does not expect premium refunds.

“It’s a completely different system here … in the US, there are more options to pay monthly. But in this market, you pay premiums annually,” he says. “So I don’t see that happening.”

Here are some of the discounts car insurers in the UAE are offering:

Oman Insurance

Oman Insurance is offering its retail motor customers 30 per cent off their monthly premium for April and May as a discount when they renew their policy.

“In these trying times, we are determined to support the community by sharing the temporary and unusual profits on motor insurance back with our clients,” says Jean-Louis Laurent Josi, chief executive of Oman Insurance.

The company has created a Dh5m relief fund to support individual and corporate retail clients who renew their policies with Oman Insurance until the end of March 2021. In addition, customers can convert their premiums into monthly instalments at a 0 per cent interest rate with banking partners, including Abu Dhabi Commercial Bank, Emirates NBD and Mashreq.

Union Insurance

Union Insurance is offering one month free, which translates into a discount of 7.69 per cent on a comprehensive policy premium. New customers must submit a one-year no claims self-declaration and renewal customers are eligible as long as no non-recoverable claim has been reported. The offer expires on June 30.

Watania

Watania started with a one month free offer on its “Comprehensive Motor Takaful”, which is up to an 8 per cent discount, and has since increased that to two months free. It is also offering a 20 per cent no claims discount on third-party liability car insurance policies.

In addition, the insurer, which has 30,000-40,000 car insurance customers in the UAE, is offering 50 per cent discounts to frontline workers through a partnership with Fazaa. The social initiative works with financing companies to provide leases to car buyers.

“Because of the lockdown and because of people not going out, as well as offices being less frequented, we have obviously factored that in for pricing,” Gautam Datta, chief executive of Watania, tells The National.

While the offers are due to expire on May 31, Mr Datta says, “it’s possible that will be extended until end of June because, as we see, the lockdown is going to continue in some shape or form”.

Axa Gulf

Axa Gulf does not offer specific car insurance discounts related to Covid-19. However, Franck Heimburger, chief personal lines officer at Axa Gulf, says: “For all new customers and customers renewing with Axa, our initial prices take into consideration the reduced amount of driving that people are doing at the moment, the less chance of accidents happening and supporting our customers in a time of what could be financial hardship.”

Axa is following the IA’s guidelines to give discounts of up to 50 per cent to frontline workers, he adds.

Beema

Beema, an online car insurance company created through the Enoc Next accelerator programme in partnership with Axa, gives cashback of up to 25 per cent to customers who drive 20,000 kilometres or less in a year.

Although the product was unveiled in October, this may be the perfect time to benefit from racking up less mileage. The comprehensive car insurance starts from around Dh1,300. If you decide to renew your policy for a second year, your Beema mileage resets to zero.

Updated: May 20, 2020 02:28 PM

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