Car Insurance in the UAE & COVID-19: getting the additional mileage in your quotes?

As we see Dubai welcome tourists with open arms and as international travel potentially comes back slowly but surely, organisations in the UAE need to adapt to what is often being termed as the 'new normal'.

One such industry is car insurance. The crisis is hitting the insurance industry more universally and faster as claims and operational costs are rising due to crisis management, while auto insurance premiums shrink as people drive less due to social distancing.

But digital insurance platforms such as InsuranceMarket.ae are well-prepared to deliver during such times by effectively responding to customer queries and efficiently working on claims through their virtual infrastructure.

Avinash Babur, Founder & CEO, InsuranceMarket.ae, in an interview with Khaleej Times talks about how the comparison website is scaling up its tech, marketing and hiring efforts to get the wheel rolling.

Excerpts from the interview

Tell us about the rise in digital-first insurance broking?

We are pleased to report that we at InsuranceMarket.ae have processed a record number of transactions this year so far, with a surge seen in Q2 since movement restrictions began. This is all a result of our ability to proudly demonstrate that we can deliver on our mission to save our clients' time and money on the insurances for their car, health, home, life, travels or business. There are certainly some great motor insurance discounts out there.

Have you witnessed any savings on auto insurance rates and premiums?

The number of accidents have dropped and the benefits of these are being passed on to consumers. There has been and will continue to be a tremendous downward pricing pressure on insurers as the frequency of claims reduces given that people will drive less. Voluntary social distancing in some form may well continue until the end of the year or until the vaccination is developed and propagated at a mass scale.

How will the valuation of cars be impacted?

We have started seeing a decrease in car valuations as rent-a-car companies and private individuals resort to distress/undervalued sale of assets, coupled with weaker demand for the purchase of both brand new and used vehicles. This will proportionately exercise a downward pressure on insurance premiums.

What has been the impact on the size of the addressable market for vehicle insurance?

There has been and will continue to be a reduction in total insurable value from a macro perspective as consumers hold on to their cars longer and avoid upgrading if they don't have to, partly due to reduced consumer confidence but also crucially due to lower utilisation of vehicles.

Do you see a reduction in car insurance post pandemic?

There might be a drop in the number of cars on the road because of a decline in the employed population, obviously resulting in an overall decline in the number of motor insurance transactions. The downward pressure on demand has also motivated some insurers to drop their rates so as to make up for lost revenue by increasing transaction volumes.

However, luxury/exotic/classic/supercars' insurance segments have continued to do well as the high net worth insurance segments have seen little or no impact on their liquidity/disposable income.

Thankfully, due to our digital capabilities and our unique ability to save our clients time and money, we at InsuranceMarket.ae have issued a record number of insurance policies since the lockdown and the growth continues to surge upwards month-on-month.

Is the Covid-19 pandemic an opportunity for usage-based insurance?

It's a bit of a catch-22 for UBI. At face value there is obviously a stronger case in theory as people drive less; however, the overall margins for insurers in the UAE have always been too thin due to competitive pressures, and this will continue as conventional insurers will adjust rates to match the reduction in driving, thus making it difficult for pay-per-km insurance to truly succeed in delivering meaningful value to consumers.

Will we continue to see a decline in ride sharing and the sharing economy in the foreseeable future in the UAE? Do you think this would lead to a surge in car ownership?

Ridesharing has seen a major decline and will likely continue to do so as gig economy workers have started to look for greener pastures. App-based car service and rent-a-car users may abstain from using Uber-like services to reduce their exposure to the virus and might consider buying their own cars for the sake of hygiene. This will likely cause an upward impact in the demand for personal car insurance.