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Higher premiums, additional fee: Why 'insurance break' is getting costly for UAE motorists after rains

Driving without valid insurance after the grace period is illegal in the Emirates and can lead to fines, penalties, or legal action

Published: Mon 27 May 2024, 6:00 AM

Updated: Mon 27 May 2024, 10:15 PM

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Insurers in the UAE have become stricter about renewing vehicle insurance policies and underwriting guidelines following a massive jump in claims after the record rains on April 16.

Brokers in the country told Khaleej Times that motorists' delays in insurance policy renewals beyond the grace period would cost significantly higher premiums, additional declarations and inspection fees.

In mid-April, the UAE had its highest rainfall in 75 years after a storm, causing flooding in many areas of the country, and damaging thousands of vehicles, homes and shops.

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According to Hatim Maskawala, managing director of Badri Management Consultancy, insurers have had varying estimates of losses due to rains. Hence, insurance companies have started increasing the premium rates – especially for motorists – to counter the impact.

In the UAE, a car insurance policy is valid for 13 months instead of the usual 12-month contract, giving motorists one month of grace to renew their policy.

Anas Mistareehi, CEO of eSanad, says this grace period should not be used as a justification for intentionally delaying registration. “While it provides a buffer, timely renewal of car insurance and registration is essential to avoid any legal or financial repercussions.”

He warned that driving without valid insurance after the grace period is illegal in the UAE and can lead to fines, penalties or legal action. Additionally, accidents or claims during a lapse in coverage can result in significant out-of-pocket expenses.

He also cautioned motorists about insurance firms increasing premiums if there's a gap in coverage and how continuous coverage is necessary to preserve any no-claims discount, which can result in lower premiums.

Neeraj Gupta, CEO, Policybazaar.ae, said taking a break in car insurance renewal by letting the current policy lapse and going a period without active coverage is hitting the pause button on your car's financial protection.

“Most insurers usually offer a 30-day grace period after the expiry date. During this time, you can renew your policy without penalty and avoid a lapse. Letting your policy fully lapse means losing out on potential benefits. Insurers offer a No Claim Bonus (NCB) for continuous insurance. This discount on your premium decreases the more years you go without claiming. A break in coverage resets your NCB to zero, potentially leading to a higher premium when you eventually buy a new policy,” Gupta told Khaleej Times.

Pre-inspection, additional fee

He warned of motorists’ lapse extending beyond the grace period, where getting insured again might involve more than just renewing. “Some insurers might require a reinstatement process with additional fees or inspections. In extreme cases, you might have to purchase a completely new policy, and depending on the length of the lapse, the premium could be significantly higher.”

Gupta added that a grace period is a short window where car owners can catch up without penalty, but longer gaps can lead to complications and potentially cost them more in the long run.

After the April 16 rains, insurers have become more stringent with their underwriting guidelines. He said that a lapse might trigger stricter underwriting criteria, making it harder to get approved for new coverage or higher rates.

According to Gupta, insurers conduct pre-inspection and take additional declarations before a policy is issued to vehicles with lapsed insurance policies.

When a car insurance policy lapses, obtaining new coverage can be challenging as insurers see such a motorist as a higher risk.

“New insurers may require proof of previous insurance. A coverage gap might lead to additional scrutiny or the need to provide more documentation to prove insurability.”

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