The cost of car insurance premiums could rise in the UAE as a result of a system that makes payouts for replacing a car more accurate.
Traditionally, insurers applied a standard formula to calculate the value of second-hand vehicles.
But in the past year, four of the six biggest insurers in the UAE have signed up to use Autodata Middle East's system, which constantly tracks prices to ensure that the basis for an insurance quote - the residual value of the car - is accurate.
"We have a lot of data resources, like manufacturers, car dealers, auctioneers.
"We go into the market ourselves every day, with a complete team to visit the dealers … to see how the prices are developing," said Pascal Persoon, the general manager of Autodata Middle East.
"There is the misconception in this region that vehicles depreciate by a preset percentage each year," Mr Persoon added.
He said prices change daily because of a range of factors, including depreciation of the car and the time of year it is being sold.
Zurich is one of the latest insurers to sign up for the service. Maroun Mourad, the chief executive of the company's general insurance operations in the Middle East, said would help Zurich to be more accurate in pricing risk.
Those insured with companies using the system will also receive a fairer price for their car following a major crash, Mr Persoon said. But it could ultimately result in higher premiums as the price is calculated as a percentage of the value of the car.
"It could also be the other way around. For example if there is an oversupply of certain cars.
"Suppose [an] Abu Dhabi taxi [company] sells 1,000 of its Nissan Altimas directly on the market and there is an oversupply, you will see that the residual value of that specific car goes down," he said.
Getting a more accurate price will benefit the consumer in the end, he said, even if premiums rise. "[You may] have to pay maybe Dh500 or Dh1,000 more a year to insure the car … It hurts for Dh500, yes, but you will get it back when you trade it in."
