Motor insurers in the UAE are meeting new consumer expectations by focusing on personalised offerings and data-driven solutions, even as they navigate regulatory shifts, fraud risks and a crowded market landscape. As digital insurance gains momentum among younger consumers, industry experts say insurers must strike a balance between tech-driven convenience and personalised service to meet diverse client needs and build long-term loyalty.
Motor insurance is highly prevalent in the UAE, due mainly to the country’s extensive vehicle ownership and laws that mandate every driver must have at least basic third-party coverage.
With many insurers competing for customers and pricing pressures, these companies are compelled to come up with new and creative ways to stand out; whether through better services, add-ons, or digital tools to make buying and managing policies easier.
Merimen director of operations UAE Fatima Farhat said as of 2024, the motor insurance market in the UAE is characterised by heightened competition and a shift towards digital transformation, improving customer experiences.
“While insurers are prioritising customer-centric products and leveraging data analytics to offer personalised premiums, regulatory changes continue to influence the market, while challenges such as fraudulent claims and market saturation remain.
“Overall, the industry is evolving to cater to varied consumer needs amidst economic pressures,” Ms Farhat said.
Motor insurance premiums in the UAE have spiked due to several factors, including inflation, which has increased operational costs for insurers.
Ms Farhat said the increasing costs of repairs, driven by higher prices for parts and labour, have also contributed to this trend.
Moreover, she said supply chain disruptions have caused delays in parts availability, further escalating repair times and costs.
“An uptick in claims related to adverse weather conditions and flooding in 2024 has added to the pressure on insurers to raise premiums. Consequently, insurers are adjusting their pricing strategies to maintain profitability considering these economic and environmental challenges,” she said.
A dual trend
In 2024, the UAE motor insurance market has seen a dual trend.
“On the one hand, insurers with strong customer loyalty programmes and retention strategies, such as discounts and personalised services, have maintained stable policy renewal rates. On the other hand, rising premiums have made consumers increasingly price-sensitive, leading to a noticeable trend of switching providers,” she said.
“The growing availability of online comparison tools has made it easier for customers to shop around for better rates, further driving this shift,” she added.
Overall, the motor insurance market remains competitive, with insurers adapting to both stable renewals and the pricing pressures.
Facing significant transformation from new regulations
Ms Farhat said she is starting to witness UAE’s insurance industry being on the verge of significant transformation due to new regulations, which aim to reinforce transparency and consumer focus.
These changes present both challenges and opportunities.
“As the adoption of electric vehicles (EVs) increases, insurers will likely need to adapt their policies to meet unique coverage requirements and potential compulsory coverage mandates for EVs,” she said.
The popularity of EVs is transforming motor insurance by prompting changes in underwriting, repair costs and premium structures.
Insurers are adapting risk assessments to account for the unique risks associated with EVs, such as battery performance and charging infrastructure.
“Repair costs for EVs are generally higher due to specialised parts and technical expertise, which may lead to higher premiums in the initial phase. However, as competition in the market grows, these premiums are likely to stabilise over time, with some insurers offering discounts to encourage EV adoption,” she added.
She encouraged insures to stay informed about regulatory updates, as changes may emerge to ensure adequate coverage for the expanding EV market.
Digital insurance gains ground
Trends in various markets indicate a growing acceptance of digital insurance solutions, particularly among younger, tech-savvy consumers who value the convenience and speed of online transactions.
However, Ms Farhat said traditional broker-led purchases may still appeal to those who prefer personalised service and expert advice, especially for more complex insurance needs.
“To succeed in this evolving market, all insurance players should start investing in technology to improve operational efficiency while providing customer-centric services to sustain clients’ loyalty,” she said.
Growing car numbers
“The UAE motor insurance market is poised for substantial growth over the next three to five years, driven by factors such as increasing vehicle ownership due to population growth and economic development, leading to more cars on the road and a heightened demand for motor insurance,” she said.
Additionally, enhanced regulations and mandatory insurance requirements are expected to stimulate market expansion.
She said technological advancements are facilitating easier access to insurance products through digital platforms for purchasing and managing policies.
The rise of EVs will also require insurers to adapt their offerings, potentially resulting in new insurance products and increased competition, she added.
“To sustain such growth, digital transformation within the UAE motor insurance market can significantly enhance various aspects of the industry,” she said.
“By employing data analytics, insurers can gain valuable insights into market trends and consumer behaviour, enabling them to develop responsive strategies in light of changing conditions since 2024,” she said.
Automated pricing models can adjust premiums in real-time, addressing inflation and rising repair costs.
Advanced CRM systems can improve customer engagement, potentially increasing policy renewals and identifying reasons for switches in providers.
Compliance management software can streamline adherence to new regulatory requirements, while risk assessment tools can refine underwriting processes for EVs.
Ms Farhat also said that user-friendly digital platforms can cater to the increasing demand for digital-only policies and innovative products can further spur market growth in the coming years.
“Overall, embracing technology not only enhances operational efficiency but also improves customer experience and facilitates market expansion and growth,” she said. M