The Board of Directors of the Insurance Authority issues two decisions concerning the amendments on the prices tariff and Unification of Motor Vehicle Insurance Policies

: 12/19/2017

The Board of Directors of the Insurance Authority issues two decisions concerning the amendments on the tariff and Unification of Motor Vehicle Insurance Policies.

 

"The Amendments contribute to enhancing the competitiveness of the local market and encouraging insurance companies to provide the best services", said Al Mansoori:

- The reduction of insurance premiums for vehicles owners, who have claim-free records with a percentage ranging from 10 % to 20 %.

- The reduction of insurance premiums for vehicles and motorcycles fleets with a percentage of 30% less than the minimum.

- The Reduction of insurance premiums for vehicles running on gas and electricity to support the efforts exerted to rely on renewable energy.

- Introducing new provisions in the insurance of taxis, vehicles of rental offices, classic and old vehicles.

- Tackling the bases of Refund between companies when repair is done within the Agency.

Abu Dhabi on December 18, 2017

During the meeting of the Board of Directors of the Insurance Authority chaired by H.E. Sultan bin Saeed Al Mansoori, Minister of Economy and Chairman of the Insurance Authority, the Board has issued two decisions. The first is to amend decision No. (30) of 2016,concerning the Tariffs regulation of Motor Vehicle Insurance .The second is to amend some provisions of decision No.(25) of 2016 , concerning the Regulation of the Unified Motor Vehicle Insurance Policies.

The Minister of Economy and Chairman of the Board of Directors of the Authority said that the new amendments to the tariffs regulation of motor vehicle insurance and the regulations of Unification of Motor Vehicle Insurance Policies were based on the results of the studies conducted by the Authority on the effects of the two regulations in the local market during 2017 and based on the Authority's keenness to provide the best Insurance services in the local market at competitive premiums and coverage to ensure the protection of the insured and beneficiaries rights taking into account the interests of all parties and the interests of the national economy.

His Excellency has emphasized in a press statement that the two new decisions aim to protect the rights of policyholders and shareholders of insurance companies equally and to protect the companies themselves from the risks they may encounter in the future. Eventually, this will contribute to the development of the necessary foundations and technical rules to enhance the establishment of modern regulatory fundamentals of the motor vehicle insurance market in the UAE. This will lead to an increase in the contribution of the insurance sector to the GDP and will support the growth of the national economy in all fields.

His Excellency has clarified that the new amendments help to encourage policyholders not to commit accidents and contribute to the achievement of the Strategic National Index relating to reducing the death rate resulting from road accidents.

He added that the Authority has made amendments to some provisions of the tariffs regulation to support the efforts of the State to promote reliance on renewable energy and adopt clean and green energy solutions, which contribute to the preservation of the environment and reduce the pollution and emissions produced by traditional cars.

He pointed to the importance of the new provisions in enhancing competition in the local market and encouraging companies to provide the best services at competitive premiums, which will lead to the development of the performance of the UAE insurance sector, increase its contribution to the country's GDP and enhance the UAE's position as a vital global center for all insurance operations.

He explained that the regulation of unified vehicle insurance policies against Third Party Liability and Loss and Damage is an important and quantum leap towards the development of regulatory bases and technical rules for the development of the performance of the UAE insurance market, motor vehicle insurance sector and protecting the rights of the policyholders as its provisions are in line with the best practices prevailing in the insurance industry worldwide. He pointed out that the regulation of unified policy contains a lot of benefits for policyholders and local market that were not present in the two previous standard policies.

His Excellency emphasized that the Insurance Authority will continue to monitor the performance of companies and the extent of their commitment to apply the tariff and rectify any practices that are not in accordance with the issued laws, regulations and instructions in a manner that leads to the promotion of this vital sector and enhance the leading role and competitive level of the UAE worldwide.

 

• The Decision of "Tariffs" Regulations

The Insurance Authority decision of the Board of Directors' decision No. (41) of 2017 concerning the  amendment of some provisions of Decision No. (30) pertinent to the issuance of motor vehicle insurance tariff regulations , which will come into force by the commencement of 2018 will include the amendment of the minimum tariff for motorcycles, which are specified in table No. (2) of the vehicle insurance tariff against Loss and Damage and Third Party Liability to be (AED 800) for engines up to (200CC) and (850) AED for engines more than (200CC), while the lowest premium for the insurance of the motorcycle was at a maximum of (AED 1050) without any discrimination in engine capacity.

The decision specified that paying the insurance premium for (the passenger) in Table (2) should be limited to individuals who work for the insured.

Article (2) of the regulation was amended by deleting item (2) and replacing it by the following text:

"Insurance companies are free to compete by offering tariffs within the limits set forth in tables (1) and (2) attached to the Regulations herein. If the company decides to compete in offering tariffs, each company shall be fully and directly liable for the soundness of its decision from the technical and actuarial aspects pursuant to the Insurance Authority Board of Directors Resolution No. (11) of 2016 Concerning the Revision of the Pricing Policy Applied by a Company in the Classes of Property and Liability Insurance and the underwriting policy of the actuary in a way that reflects its previous experience with its customers and does not endanger its financial position or lead to the loss of the insured rights."

In addition, eight new paragraphs were added to the second article of the system, which includes reducing the premiums with annual ascending rate at the time of renewal time for vehicles owners, who have claim-free records. As well as reducing the premiums for the fleet of vehicles and motorcycles, and vehicles running on gas and electricity. Additional new paragraphs concerning the insurance of taxis, rental offices' vehicles, and classic and old vehicles were also added.

In accordance with these amendments, the new paragraph (3) stipulates that the Company shall grant a reduction of the premium at the rate of 10% of the minimum premium to the owner of the vehicle which has not caused an accident leading to a claim during the previous insurance year and 15% of the minimum premium to the owner of the vehicle that did not cause an accident leading to a claim during the previous two years, and 20% of the minimum premium to the owner of the vehicle that did not cause an accident leading to a claim during the previous three years, plus a 10% discount on the minimum premium as " a loyalty reduction to the company's customers" shall be granted to the owner of the vehicle at the time of renewing his policy with the same insurance company, provided that the insurance is not transferred to another person.

Under the new paragraph (4) of Article (2), the insurance company is obliged to immediately provide the customer who had insurance from it with a free of charge certificate showing the insurance experience for the previous years, electronically or in writing, where the company shall be liable for the data contained therein.

 Under the new paragraph (5), the amendment entitled the Company to grant a reduction for the vehicle fleet or motorcycle fleet by no more than 30% of the minimum premium. The fleet is defined by "five or more of vehicles or Motorcycles owned by one natural person or a legal person, including ministries, federal and local authorities, official government or semi- official government bodies, an independent body, a charity or  nongovernmental organization, a company or individual institution, etc. "

 The amendment also entitled the company under paragraph (6) to grant reduction for vehicles running on gas and electricity at the renewal time of not more than 25% of the insurance premium taking into account the accidents caused by the vehicle and led to claims. Nevertheless, when there is more than one reason for reduction, only the highest rate of reduction shall apply.

The Paragraph (7) defined the application of the provisions of the preceding paragraphs to insurance of the vehicle against Third Party Liability and the vehicle insurance against loss and damage.

 Article (8) was related to saloon taxi vehicles, and vehicles of rental offices. The paragraph stipulates that, as an exception of the provisions of paragraph (1) of Article (2), the Company may agree with the Owner on the insurance tariff of this type of vehicles which shouldn't exceed (6.5%) of the value of the vehicle, based on the loss ratio, the technical opinion and its previous experience.

In addition, paragraph (9) dealt with the classic and old vehicle, and stipulated that the tariff of Third Party Liability insurance shall be applied on the "classic and old vehicle", while the determination of the premium of the vehicle insurance against loss and damage shall be subject to the agreement between the owner of the vehicle and the insurance company. The classic and old vehicle was defined by "an old vehicle of historical value not less than 30 years old, has artistic industrial value, or has a unique design that is different from its like."

 

  • Unified Motor Vehicle Insurance Policy against Third Party Liability

 

The Board of Directors' Decision No. (42) of 2017 ,to amend certain provisions of Insurance Authority Board of Directors' Decision No. (25) of 2016 Pertinent to Regulation of the Unified Motor Vehicle Insurance Policies, which  will come into force by the commencement of 2018, has included the renumbering Article (13) of Chapter one (General Conditions) .

After adding the clause "for the type and year of manufacture of the vehicle" after the clause "suitable repair shops ....", the paragraph (a) shall read as follows: "Upon the lapse of more than one year after registration and use, the Company shall repair the damaged Motor Vehicle at suitable repair shops for the type and year of manufacture of the Motor Vehicle and the damaged parts may be replaced by other original parts of the same grade…… ". The company shall ensure that repairs are carried out in accordance with technical standards and  shall ensure that the work is warranted by the repair shops .The Company shall insure that the affected third party is able to have the motor vehicle checked by an approved Motor vehicle examination agency in the State to make sure  that the vehicle has been properly repaired in accordance with the technical standards and in a manner that meets the required lessening conditions for endurance, safety and any other condition without affecting the technical examination of the motor vehicle damaged by the accident at the official authorities. If it is found that the repairs are below required and recognized the technical standards, the company shall address the issue(s) until the affected third part receives his vehicle fully repaired in accordance with the technical standards as soon as possible.

Paragraph (b) was added to Article (13) which reads as follows: "For the damaged motor vehicle, insured against loss and damage at an insurance company with the condition of repair within the Agency, the repair shall be carried out within the Agency's repair shops pursuant to this condition. The insurance company insuring the loss and damage has the right of recourse against the Third Party liability insurance company in accordance with the specified reimbursements bases"

The addition of this paragraph to the Unified Motor Vehicle Insurance policy against Third Party Liability aims to resolving the problematic issues between the companies in repairing the motor vehicle within the Agency's shops in the second and third years of the vehicle's durability, so that the insurance company insuring the loss and damage has the right of recourse against the Third Party liability insurance company after repair is done.

The bases of reimbursement were determined as follows:

  • For the motor vehicle that has passed more than one year from its first registration or its use and until the end of the second year shall be after deduction of 15% of the value of the final repair bill.
  • For the motor vehicle that has passed more than two years from its first registration or its use and until the end of the third year shall be after deduction of 30% of the value of the final repair bill.
  • In case more than three years have lapsed since the first registration or use of the motor vehicle, the company shall abide by repairing the damaged vehicle at suitable repair shops for the type and year of manufacture of the vehicle. The damaged parts shall be replaced with original parts of the same grade. If the agreement between the Loss and Damage Insurance Company and the insured has the condition that "repair shall be within the agency", this condition shall remain effective. Also, the existing rights between companies prior to the implementation of this regulation shall be observed.

 

A clause (fourth) was added to the provisions of paragraph (e) of Chapter Two "Obligations of the Insurance Company" to be read as follows:

" In case of the entitlement to the loss of benefit allowance and the Affected Third Party has insurance against loss and damage and Third Party Liability, he shall be entitled, for the purpose of obtaining the loss of benefit allowance to claim directly to his company, which has the right of recourse for same amount paid against the insurance company of the insured, who caused the accident and has insurance against Third Party Liability".

The addition of this paragraph was due to the fact that the subject of the claiming for the loss of benefit allowance raises disputes when the affected party recourses to his company to repair, the company has the right of recourse for same amount paid against the insurance company of the insured, who caused the accident

 

  • Unified Motor Vehicle Insurance Policy against Loss and Damage

The new amendments included some provisions of Chapter one "The General Conditions of Unified Motor Vehicle Insurance Policy against Loss and damage". Paragraph (b) of Article (8) was deleted and replaced by the following text: "The Insured shall be liable to pay the dues arising on the vehicle before receiving the compensation and to submit the required papers and power of attorney and attend before the competent departments, if necessary in order to transfer the ownership of the motor vehicle to the company. Whereas, in case there is mortgage, the company shall undertake without delay the communication with the competent entity (the owners of mortgages) to obtain a non-objection letter to transfer the ownership of the salvage of the vehicle to the company.

 

Two new paragraphs (13) and (14) were added to the Chapter One "General conditions" aiming to resolving some of the problematic issues used to arise between the insurance company and the insured causing the accident in the (comprehensive) insurance against loss and damage.

 

Article (13) stipulates that," In case of the entitlement to the loss of benefit allowance and the Affected Third Party has insurance against loss and damage and Third Party Liability , he shall be entitled, for the purpose of obtaining the loss of benefit allowance (substitute motor vehicle) to claim directly against his company ,which has the right to claim the for same amount paid to the insurance company of the insured ,who caused the accident and has insurance against Third Party Liability in accordance with the rules specified in the Third Party Liability policy ".

 

Article (14) stipulates that "If the fixed and irreplaceable parts of the motor vehicle such as chassis or pillars are damaged and need cutting, tightening or welding as a result of the accident, the motor vehicle shall be considered total loss and the Company shall be obliged to pay the compensation according to the value specified in the policy between the Company and the insured"

 

  • Procedures of the Insurance Authority

Since the implementation of the Insurance Authority Board of Directors' Decision No.(30)  of 2016 to issue the regulations of "Tariffs" of vehicle Insurance, the Insurance Authority has taken several steps and procedures to evaluate the application of the decision, including the formation of a field and analytical control team to determine the extent to which the market applies the tariff regulation and submit a study on the extent of the company compliance with the tariff regulation.

The results of the study found that there is stability in the level of premiums of Third Party Liability insurance policies, so that they reached the minimum in several categories, as well as a relative stability in the average premium in the comprehensive insurance.

  • Results and positive impacts

The contents of Decision number (30) of 2016, concerning the tariff of vehicle insurance policies came to rectify the current situation  based on a specialized actuarial study depending on statistical studies of previous risks, analyzing them and making a risk analysis of future risks that may arise from the imposition of the new coverage or as a result of analyzing the anticipated cash flow of premiums and its relativity with anticipated future risks and therefore determining the premiums of the insurance product in order to ensure that insurance companies do not adopt the policy of slashing prices that expose the company to future financial losses and in turn affects its ability to meet its obligations to the policyholders and beneficiaries.

 The companies were obliged with a maximum premium in such a way as to ensure that the companies do not excess the maximum limit value, which leads to the protection of the insured and achieve a margin of profitability of companies. Thus, enhance the companies' continuation as financial and economic companies that contribute positively to support the economic development in the State and increase their ability to meet their obligations to towards customers and others in a proper and just way.

The results and impacts of the issuance of the Regulation of the Unified Motor Vehicle insurance policies manifested in several issues, the most important of which is the decrease in the number of complaints received by the Authority in relation to the new policy. As the percentage of complaints on the new policy until the third quarter of this year was 10.6%, while the percentage of complaints on the old policy during the same period of was 89.4%.

 The results also emphasized on the protection of the rights of the insured and the positive reflection on the policyholders as a result of the tangible improvements and new benefits included in the insurance policy against Third Party, as well as the increase of the insurance awareness among the policyholders of their rights and obligations.

 

  • Justifications and new benefits

  The analysis of the vehicle insurance portfolio (compulsory insurance against third parties) revealed a number of problems in the application of the two previous policies for the insurance of vehicles issued in 1987, which prompted the Authority to issue the Regulation of the Unified Motor Vehicle insurance policies last year. The most prominent of these problems are limited to the increase in the number of complaints and inquiries received by the Authority from (81) complaints and inquiries in 2012 to (7565) complaints and inquiries in 2016, and the weakness of the ability of a number of companies to meet their obligations to customers in the insurance of motor vehicles. Also, the companies' failure to continue their business, properly meet their contractual and legal obligations towards the insured or the beneficiaries and endanger the rights of insured and beneficiaries, due to the successive losses in the vehicles insurance portfolio resulting from the underwriting at premiums below the limits of proper technical pricing.

These problems have been limited to the inconsistency of the paid insurance premium in force since 1996 with the amount of the paid or anticipated compensation due to several factors that have led to an increase in the value of compensation over the past 20 years.

       As a result of the successive amendments made on the Ministerial Decision issued in 1987 and the developments happened on the subject of the motor vehicle insurance over the past 30 years and, through an extensive technical study of the inherent deficiencies in the insurance coverage of the two old unified policies, which caused the failure of the insured or the beneficiary of the motor vehicle insurance policy to obtain the best services, the Insurance Authority amended the coverage granted to the Affected Third Party of vehicle accidents in a manner that ensures that their rights are obtained fairly and without prejudice ensuring that adequate coverage of the insured's obligations towards third parties is fulfilled. This study included the preparation of the two new policies that are containing a lot of new benefits.

 

 The most prominent of these benefits extend over the inclusion of family members including the husband or wife, children and parents in the insurance coverage instead of excluding them as mentioned in the previous policy. In addition to raising the limits of insurance companies' liability towards third parties for material damages from (250) thousand dirhams to (2) million dirhams .Also, the owner of private vehicle is entitled to substitute motor vehicle similar to the damaged motor vehicle during the repair period or daily fare not exceeding Three Hundred UAE dirhams (AED 300) with a maximum period of 10 days. As for the commercial motor vehicles, they were not included to avoid the increase in the cost of insurance. The benefits also included the establishment of new foundations for repair within the Agency shops for the damaged motor vehicle, which did not exceed one year on the road, and obligate the insurance company to install original spare parts either new or used. Also a clear mechanism was developed in the event of a dispute between the insured and the insurance company related to the of repair or compensation in case of total loss of the motor vehicle, thus, it was stipulated to use a loss and damage adjustor to estimate the damage for this purpose. The period of 13 months was considered the period of the effectiveness of the insurance and therefore no deduction may be made for the thirteenth month as was applied before the amendment. A second standard of total loss was added; so that the damaged motor vehicle parts and irreplaceable parts of the motor vehicle such as chassis that need cutting, tightening or welding or shall be considered total loss.

 

-  The End -

Table explaining the main amendments on the regulation of "Tariffs" of the Motor Vehicle Insurance

 

Previous TariffNew tariffSpecifications & conditionsAmended paragraph
1050 AED800AED Up to 200 CCTariff of (minimum premium) of the Motorcycle
850AED More than 200 CC 
New10% of the minimum insurance premium-Did not cause an accident leading to a claim during the previous insurance year
New15% of the minimum insurance premium-Did not cause an accident leading to a claim during the previous two years
New20% of the minimum insurance premium-Did not cause an accident leading to a claim during the previous three years
New10% of the minimum insurance premium

When renewing the policy with the same insurance company, provided that the insurance is not transferred to another person.

 

Loyalty Reduction to the company's' customers
NewReduction of not more than 30% of the minimum premiumfive or more of vehicles or Motorcycles owned by one natural person or a legal personFleet of motor vehicles
NewReduction of not more than 30% of the minimum premium and when there is more than one reason for reduction, only the highest rate of reduction shall applyMotor vehicles running by gas and electricityMotor vehicle running by Alternative Energy
NewAccording to the agreement with no more than (6.5%) of the value of the vehicleTaxis and motor vehicles of rental officesTaxi and rental motor vehicles
New

- The tariff of Third Party liability Insurance shall apply

- According to the agreement for the insurance against Loss and Damage

an old vehicle of historical value not less than 30 years old or has artistic industrial valueclassic and old vehicle

 

 


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