Car Insurance Rates Soar in UAE

Residents in the United Arab Emirates are facing a significant hike in car insurance rates, with premiums increasing by more than 40 percent in some cases. This surge particularly affects owners of electric vehicles and young drivers, who are often subjected to higher premiums or even outright rejections by insurers.

Background of the Rate Hikes

In response to the rising premiums, a member of the UAE Federal National Council questioned the pricing practices of insurers and the declining level of services offered. Numerous complaints have been received about mandatory liability insurance being charged at double the rates, while deductibles can reach up to 15 percent – a burden that places additional financial pressure on the populace.

Challenges Surrounding Electric Vehicles

For electric cars, insurers cite significant technical and logistical obstacles. The repair costs for these vehicles are higher, the supply of spare parts – especially batteries – is limited, and there is a scarcity of certified service centers. Additionally, many models lack official dealerships or warranties in the UAE, especially if offered by independent car dealers.

The oversight body also referenced the 2024 floods as an example, with many water-damaged electric vehicles having to be written off completely. These risks heighten insurer caution, further compounded by the lack of long-term performance data.

Response from the Central Bank

The UAE Central Bank, which oversees the insurance sector, has confirmed that insurers must operate within a unified pricing framework that sets minimum and maximum rates. According to the Central Bank, a standard insurance document is in place in the market to ensure uniform basic coverage. Discounts of up to 25 percent can be allowed for electric and gas-powered vehicles, depending on risk levels and operating costs.

The Situation for Young Drivers

Beyond the premium hikes, young drivers are also facing difficulties. Although the legal driving age has been reduced from 18 to 17, some insurers still refuse to offer coverage to this age group. This contradicts national transport objectives and limits mobility options for an entire generation.

Proposed Reforms

The Federal National Council has urged financial regulators to review the standard insurance document and update it to better reflect the UAE's clean energy strategy, as well as to promote the spread of electric vehicles and the integration of young drivers. Furthermore, regulating the practice of automatically decreasing insured value, which can adversely affect customers in the event of a total loss, is necessary.

(Source of the article: Federal National Council (FNC) release.)