The recent floods have had a serious impact on the Dubai economy, both in terms of loss to business and the emotional and financial loss to individuals. Such losses are commonplace elsewhere in the world. In developed economies many individuals and companies buy insurance to protect their assets. People have insurance for their cars, homes and valuables while companies insure their business premises.
When we compare the UAE to such economies there are certain notable differences, for example crime levels are very low, weather patterns are relatively benign, and government intervention in mandating compulsory cover is less than in other societies. This combination of circumstances has led to a penetration level of insurance purchasing at below five per cent of those who should buy cover. Such a low level in cover inevitably means then when a territory is affected by a “spike” loss such as we have had this month, the fall-out in terms of anguish, loss, uncertainty and trauma is much higher than other markets – there is no insurance company to pick up the costs and help the resolve the problems suffered.
Insurance prices are surprisingly good value; contents insurance rates are priced at circa 0.4 per cent of the sum assured – that’s Dh800 to insure a villa’s contents of Dh200,000. To put that into context, that means the insurance company has a loss expectation of less than 1:250. The terms and conditions of such cover are not simply restricted to the property’s contents, but extend to areas such as accidental damage, loss of keys, passports and permits, hotel accommodation while a property is renovated, valuables out of the home such as jewellery, and the occupier’s personal and employers liability where a maid is employed.
As more people move to the Gulf, more properties are built and more businesses are established, future losses will grow if similar weather patterns continue. Individuals and companies should not consider this a freak event – it will happen again and could be more serious. It’s time to take stock of your insurance needs.
n Michael Walton, Director for General Insurance at Nexus Insurance Brokers