Will your car, medical insurance premium go up this year?

For UAE residents, if your car, health or any other insurance is due, then get prepared to shell out more because the insurance price may go up later this year.

Insurance prices went down last year for companies reduced rates to better compete but the trend could reverse later this year and the rate might rise as companies look to improve bottomline and turn profitable after sluggish 2014, according to international ratings agency Standards & Poor’s.

“The main reason 2014 earnings sagged was the fiercely competitive market for high-volume medical and motor lines.

"We believe that insurers will stop reducing prices in these lines of business, which should help earnings start to recover by end-2015,” said S&P analyst Kevin R Willis.

“The positive economic outlook for the UAE is likely to expand the insurance market in 2015, and we believe overall earnings will recover by year-end as insurers raise prices,” S&P said.

Though most companies reduced insurance prices, however, some increased last year when the competition started taking heavy toll on their bottom lines.

S&P said Abu Dhabi National Insurance Company (Adnic) started taking corrective measures last year and raised prices, S&P said.

The ratings agency believes that higher insurance prices in motor and medical will start to boost recovery in UAE insurers’ earnings by the end of the year.

Net profit drops in 2014, but...

Net profit of UAE’s listed insurance companies nearly a quarter last year to Dh878 million in 2014 from Dh1.189 billion in the previous year but the market is expected to start recovering by year-end, said an international ratings agency.

Conventional insurance firms saw profits dropping 37.4 per cent from Dh1.286 billion in 2013 to Dh805m last year million while Islamic insurers’ (Takaful) recorded Dh97m loss in 2014 as compared to Dh74m profit in the previous year, Standard & Poor’s ratings agency data showed said.

The UAE market is dominated by conventional insurance companies as 22 are conventional insurers.

“The positive economic outlook for the UAE - we forecast four per cent annual average GDP growth - is likely to support expansion of the market for insurance by 10 per cent in 2015. Weaker oil prices may be a drag, but comfortably balanced by continuing population growth that we forecast to increase by five per cent through to 2018,” S&P said.

“We believe 2015 might be seen as an inflection point, with underwriting starting to recover by year-end and investment yields slowly benefitting from the anticipated rise in interest rates. At the same time, equity prices and investment yields (remember, these are 38 per cent of invested assets) may slip,” it said.

Total gross premium income fell to Dh15.98 billion in 2014 from Dh14.63 billion in the previous year.

S&P data showed that conventional insurers’ premiums income rose to Dh13.75 billion from Dh12.42 billion but Takaful firms recorded decline.

“The UAE listed insurer market posted its worst-ever underwriting performance in 2014, mainly because of fierce competition that drove down premiums in medical and motor insurance,” S&P said.

Of the seven Takaful companies, five recorded net profits in 2014, compared with only three in 2013, said the ratings agency.
 

Follow Emirates 24|7 on Google News.