UAE Motorists Advised to Upgrade Car Insurance Amid Rising Costs After Record Floods

Motorists across the UAE have been strongly urged to ensure their car insurance policies cover flood damage after many drivers were left facing substantial costs due to the unprecedented rainfall in April. The record-setting downpour brought much of the country to a standstill, creating scenes of chaos with numerous vehicles abandoned on flooded roads, as torrential rain overwhelmed drainage systems and submerged large areas in water.

The severe weather highlighted a critical gap in insurance coverage for many drivers, as a significant number of car owners found themselves unprotected against flood damage due to having policies that did not include natural disaster coverage. This oversight left them counting the cost of repairs or replacements out of pocket, emphasizing the necessity for comprehensive insurance in a country where extreme weather events are becoming more frequent.

Need for Comprehensive Coverage

The National spoke to experts who stressed the importance of having comprehensive insurance policies that specifically cover natural disasters like flooding. Neeraj Gupta, the chief executive of the insurance comparison website Policybazaar.ae, noted a significant shift in consumer behavior following the floods. Many motorists, previously content with more basic third-party policies, sought to upgrade to comprehensive coverage in response to the recent events.

“More people became worried after the floods and wanted to move to comprehensive cover,” Gupta explained. “It’s crucial for motorists to ensure that the policy they choose covers natural disasters.”

In April, the UAE experienced its heaviest rainfall since records began in 1949, leading to widespread disruption. Homes and roads were inundated, numerous cars were stranded on flooded highways, and many flights were canceled, delayed, or diverted. This extreme weather event prompted the UAE Central Bank to confirm that damages to vehicles and homes caused by the rain would be covered, provided policyholders had comprehensive insurance against loss and damage.

Rising Insurance Premiums

In addition to the immediate damages, the flooding has had a significant impact on insurance premiums for many motorists. Mohammed Hamadeh, the chief executive of Al Ain Ahlia Insurance Company, noted that premiums have risen by 20 to 30 percent in the wake of the floods. “The floods caused substantial losses for insurance companies, with numerous compensation claims being processed recently,” he said. “It is normal to increase prices depending on market conditions.”

These premium hikes reflect broader trends, as insurance companies seek to manage risk and protect shareholder interests. “Insurance companies are publicly listed and have shareholder funds that must be preserved and protected from losses,” Hamadeh added. “They need to make a profit.”

Particularly affected by the increased premiums are electric vehicle (EV) owners, who face higher costs due to the expensive repairs required for flood-damaged EVs. “In some cases, the insurance cost doubled for electric vehicles as many were totally damaged,” Gupta said. “Overall, insurance costs increased by 30 percent.”

He also noted that inflation, along with rising costs for spare parts and labor, contributed to the overall increase in insurance costs. “Even before the floods, there was an increase in insurance costs, but the floods added another nail in the coffin,” Gupta observed.

Julien Audrerie, executive vice president and head of consumer lines and marketing at Sukoon Insurance, highlighted that the rise in premiums was driven by regular inflation and increased reinsurance costs following the floods. “On one hand, the frequency of accidents is increasing, with more cars on the road,” he explained. “Spare parts are more expensive, and large claims above Dh100,000 are more frequent due to the general increase in car prices.”

Furthermore, the cost of reinsurance, designed to protect insurers from the financial impact of natural disasters, has surged across the market. “Reinsurers lost about Dh500 million on motor insurance alone during the last flood, and they now need to recoup their losses,” Audrerie said. “They are passing these costs to insurers, who have no choice but to pass them on to clients.”

Despite the increases, Audrerie pointed out that clients are still paying less than pre-Covid prices from 2019. “Paying less than five years ago despite the inflation is quite a bargain,” he remarked.

Counting the Cost

The effects of the flood-induced insurance hikes are being felt by many drivers. Ali Adil, an Iraqi resident of Dubai, was taken aback when he received a renewal quotation for comprehensive coverage on his 2015 Mustang GT. The quoted premium was Dh6,000, a significant increase from his previous insurance cost of Dh1,700 for non-agency repairs.

“My last insurance was around Dh1,700,” Adil said. “The new quote is Dh6,000. It’s a huge increase.”

With a clean record of zero accidents, Adil sought a discount from his insurer, citing his accident-free history and lack of flood-related claims. “I have no claims and nothing related to the recent flooding,” he explained. “They told me there was an increase in insurance costs because of the floods.”

To his surprise, the quotation for comprehensive coverage did not include protection against natural disasters or floods, covering only regular accidents. “I’m trying to find lower insurance rates,” Adil said.

Similarly, Mohammed Fathi, an Egyptian resident in Dubai, accepted the increase in premiums but believed motorists without any claims and unaffected by the floods should receive discounts. His comprehensive insurance for a 2018 Lincoln SUV increased from Dh1,200 to Dh1,700.

“I was expecting to have a lower rate of insurance as I have no claims, and my car wasn’t damaged because of the floods,” Fathi said. “But there was an increase. The insurance company told me it was due to the floods.”

Fathi, who has been driving in Dubai since 2006, expressed frustration that his clean driving history was not being rewarded with better rates. “I’ve been driving here since 2006 and have had few claims since then,” he noted. “Good drivers should get a discount.”