The UAE motor insurance sector experienced a significant loss of AED445.4 million ($121.3 million) in 2023, according to data from the Central Bank of the UAE. This underperformance has been attributed to intense market competition, underpricing, and high compensation payouts.
Mr. Mohammad Abandah, board member of the Emirates Insurance Federation, highlighted, “The results of motor insurance for most companies, if not all of them, were below expectations in terms of profitability. This is due to several factors, the most important of which is the huge compensation paid by insurers.”
Net premiums from motor insurance amounted to AED4 billion, with incurred claims reaching AED3.16 billion. Additionally, commissions totaled AED668 million, and expenses stood at AED620 million. These figures led to a loss ratio of 79%, with commissions constituting 16.7% and the expense ratio reaching 15.5% of net earned premiums.
The sector’s challenges were exacerbated by widespread price undercutting in 2023, as insurers sought to expand market share. This strategy resulted in pricing below cost, diminishing profitability. “Profits, in general, generated by the motor insurance branch are not large, but in the past two years, in particular, the branch has reached the point of losses,” said Mr. Abandah.
Despite these setbacks, the industry has begun implementing corrective measures. Insurers have adjusted pricing to better reflect the rising costs of claims, commissions, and expenses. As a result, the financial outlook for 2024 is anticipated to improve compared to recent years.
The UAE’s motor insurance market remains a critical segment within the nation’s broader insurance industry, which continues to adapt to economic and competitive pressures.
