Motorists across the UAE are facing steep increases in their car insurance premiums, with some drivers reporting hikes of up to 40 percent for renewals this year. The sharp rise has sparked widespread complaints and calls for greater transparency and oversight from insurance providers.
The issue gained further attention following a recent Federal National Council (FNC) session, where a member raised concerns about the sharp rise in insurance rates. The member questioned the Central Bank of the UAE on the need for reforms to regulate the soaring premiums.
Premium Increases: A Widespread Concern
Ibrahim Mohammed, a Sharjah resident from India, saw his premium jump by 30 percent this year, despite receiving nearly identical quotes from different insurers. “Almost all the companies listed on online insurance platforms give the same market price,” said Ibrahim, a 37-year-old warehouse cashier.
Similarly, CS, a South African resident and senior accounts manager, experienced a 40 percent increase when renewing his car insurance in April for his new Genesis. When he asked why his premiums had risen so much, he was told that the U.S. tariffs on China were to blame.
“I haven’t made any claims, so that explanation didn’t make sense to me,” said CS. “I was told that tariffs could affect spare parts prices if I ever needed repairs. But they can’t justify a 40 percent increase for imports when I’ve had no claims.”
Despite this, CS noted that drivers have no real recourse due to the UAE’s mandatory insurance renewal laws. “We have no choice but to accept the increases, even when the reasons seem unfair or misleading,” he said, calling for audits and stricter regulations.
Economic and Climate Factors Behind Premiums
Industry experts point to a variety of factors driving the price hikes, including the aftermath of the severe floods that hit the UAE in May 2024. Ahmad Al Tahat, a car insurance manager based in Abu Dhabi, explained that insurers faced substantial losses due to the floods. “It was a rare event, but the impact on claims was massive,” he said.
The rise in premiums follows a period of discounted rates during the Covid-19 pandemic, when insurers reduced premiums by up to 50 percent. The rates only began to return to normal levels by 2022, in line with Central Bank guidelines.
For example, during the pandemic, the cost of insuring a Toyota Land Cruiser was just 1.8 percent of its value, compared to 2.6 percent today. Non-agency policies also rose from 1.4 percent to 2.1 percent. Electric vehicles and Chinese-made cars have become more expensive to insure due to a lack of authorized repair centers and spare parts. However, Al Tahat noted that these vehicles are now becoming more affordable to insure as spare parts become more widely available.
Hadi El Halabi, senior manager of Motor Underwriting at Hadi Car Insurance, pointed to several systemic pressures that have contributed to the increases, including higher vehicle repair costs, economic inflation, new insurance regulations, more accidents, and an uptick in fraudulent claims. El Halabi provided a breakdown of how premiums have shifted in recent years for non-agency policies:
Pre-Covid: 2.25%
During Covid: 1.5%
Current Rate: 2.5%
The Impact of Electric and Chinese Vehicles
Historically, premiums for Chinese and electric vehicles have been higher due to a lack of risk data, expensive parts, and fewer repair centers. But things are improving, according to El Halabi. “As these models become more mainstream, insurance rates are becoming more affordable,” he explained.
Insurers have some flexibility in setting their prices, but they must adhere to actuarial models approved by the Central Bank, which also monitors solvency and ensures fair competition. El Halabi noted that while some insurers raised premiums more aggressively, the Central Bank’s reforms have removed the Covid-era discounts and reintroduced minimum pricing thresholds. For example, comprehensive coverage for a sedan now starts at Dh1,300, and third-party coverage begins at Dh750.
Consumer Behavior Changing Amid Rising Costs
As premiums continue to rise, consumers are adjusting their behavior. “More people are becoming price-sensitive. They are reducing their coverage, avoiding repairs at authorized agencies, and shopping for insurance through aggregators,” said El Halabi.
When asked whether insurance costs might decrease in the future, El Halabi expressed cautious optimism. “Premiums for electric vehicles may stabilize or even decrease in 2025 as repair networks improve and competition increases,” he said.
However, for motorists like CS and Ibrahim, the issue is about accountability. “I’m paying for repairs I haven’t even used,” said CS. “Raising the price by 25 to 40 percent because of an excuse like political tariffs is not justified. I hope there will be audits or more regulations to address this.”
