Insurers are navigating a complex terrain to price electric vehicles (EVs), according to InsuranceMarket.ae founder and CEO Avinash Babur. InsuranceMarket.ae is an InsurTech.
In an article in the newspaper, Gulf News, Mr Babur said that the recent decline in demand for used EVs, despite dealership assurances of ‘flood-free’ vehicles, points to a deeper issue. Repair costs, perceived risks and higher premiums are becoming barriers to vehicle sales.
He also said that Pay-as-you-go (PAYG) models, where premiums are adjusted based on actual vehicle usage, present innovative solutions to address these pricing challenges. By capturing data such as distance driven, driving speed and usage patterns, insurers can price policies more fairly, rewarding safe, low-mileage drivers while better managing high-risk customers.
However, the PAYG technology’s complex infrastructure, high implementation costs and consumer resistance to data sharing have presented formidable challenges. For instance, maintaining the IT systems required for data collection, transmission, and analysis — especially at the volume these models produce — is resource-intensive.
Insurers and startups must also grapple with privacy concerns as more consumers voice unease about sharing location and behaviour data.
Regulatory gap
Mr Babur said that for PAYG models to succeed, several foundational issues need addressing.
Firstly, the UAE still lacks a framework that fully supports usage-based insurance models. Without clear guidelines, insurers and startups face uncertainty about how to manage data, privacy, and liability—especially in the event of cyber attacks or data breaches involving these systems.
Secondly, there’s the question of consumer trust. Multiple studies show that a significant proportion of drivers are wary of sharing their driving data with insurers.
Lastly, PAYG models require a complete ecosystem overhaul. Insurers, repair networks and even policymakers need to align to ensure the right infrastructure is in place.
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