UAE Vehicle Insurance: Decoding Fees and Rules

UAE Vehicle Insurance: What the Law Says About Fees and Terms

Vehicle insurance is essential for every car owner in the UAE, regardless of whether the vehicle is used for daily commutes or less frequently. However, many are surprised to find significant differences in quotes during insurance renewals, even when the coverage appears to be identical. This raises the question: Is there a legal cap on how much insurers can charge for premiums? The answer is yes, the UAE legal system provides clear guidelines on vehicle insurance premiums, terms, and coverages.

The Foundation of the Insurance System is Unified Regulation

The UAE insurance system is based on the Unified Motor Vehicle Insurance Policy Against Loss and Damage regulation, introduced by the Insurance Authority Board of Directors' Decision Nos. 25 and 30 of 2016. These decisions established a unified framework defining the relationship between insurers and policyholders, premium pricing boundaries, and mandatory insurance conditions.

The aim of the system was to ensure transparency and fairness in the market, preventing excessive fees while maintaining the insurers' competitiveness and flexibility regarding extra coverages.

Legal Limits on Maximum Insurance Premiums

According to Decision No. 30 of 2016, vehicle insurance premiums are capped. The law specifies that for a 13-month insurance policy, insurers can charge a maximum of 5% on passenger cars (saloon vehicles) and up to 7% on four-wheel-drive (4WD) vehicles.

This cap applies to basic insurance, such as Third Party Liability (TPL) and Comprehensive coverage for the vehicle's own damages.

Insurers can, of course, offer additional coverages, such as for glass damage, personal items, or accident coverage abroad, but these are enforceable only through separate agreements and additional fees.

The Obligations of Insurer and Insured

The unified insurance policy clearly outlines the obligations of the parties involved. The primary duty of the insurer is to compensate for damages, repair, or possibly replace the vehicle in the event of a claim. The insurer must also ensure that repairs are conducted at authorized workshops meeting the prescribed quality standards.

On the insured side, timely payment of premiums, proper use of the vehicle, and reporting any significant changes (such as change of driver or vehicle ownership transfer) to the insurer are expected.

The policy also includes exclusions, such as if the vehicle is driven by an unauthorized driver, causes an accident in an overloaded condition, or if the accident occurs outside the coverage zone specified by the insurance.

The Role of Optional Additional Coverages

The UAE laws allow insured parties to request extra coverage, provided they are willing to pay higher premiums. These include:

Insurance of personal belongings of the driver or passengers;

Coverage for accidents outside the national road network;

Insurance for rental or temporary vehicle use during repair periods.

These options can be added to the primary insurance contract in the form of a rider. However, it is crucial that all additional coverages adhere to the general conditions set out in the unified policy, such that they do not contradict the mandatory base insurance provisions.

Why Can Prices Still Vary?

Many car owners experience significant price variations for similar types of insurance across different providers. This is because insurers consider multiple factors when determining premiums, such as:

the vehicle's value and manufacturing year,

the driver's age and driving history,

previous accident records,

parking habits and residence,

as well as the additional coverages requested.

While the law sets the maximum premium, insurers may apply various discounts, bonuses, or extra charges based on individual risk profiles.

The 13-Month Rule

An interesting trait is that vehicle insurance in the UAE typically spans 13 months, not 12. This extra month allows the vehicle owner time to renew the vehicle registration (mulkiya), which is contingent upon having insurance. This prevents anyone from driving without coverage during the renewal process.

What to Do if the Quote is Too High?

If the insurance premium seems excessively high, it is advisable to check if the quote is genuinely for basic coverage or an enhanced version. Insurance terms should always be provided in writing, and the insurer must clearly indicate which services are included in the basic premium and which incur additional costs.

Should the premium still surpass legal limits (5% or 7%), the customer can file a complaint with the Central Bank of the UAE Insurance Division, which oversees the insurance sector.

Summary

The UAE vehicle insurance system offers well-regulated and transparent frameworks for both insurers and car owners. The law strictly defines what the maximum premium can be and what a mandatory insurance policy must encompass.

However, due to market competition and extra services, price differences can still occur – hence, it pays to solicit multiple offers and thoroughly review the details before making a decision.

For safe travel and financial protection, one should select insurance that not only complies with legal requirements but also genuinely covers unexpected situations, be it accidents, theft, or natural damages on UAE roads.

(The article is based on the Unified Motor Vehicle Insurance Regulation.)