Sports car enthusiasts in the UAE may be under-insuring their vehicles, according to new research by comparison website yallacompare.
The company analysed the average insured value of sports cars dating from 2014 against the average cost of the same vehicles dating from the same year sold in UAE dealerships. It found that many second hand sports cars are being sold for more than similar models are insured for.
“Either individuals are willingly under-insuring their cars, or insurers are unwilling to agree to the valuations of these cars,” said Jonathan Rawling, the chief financial officer of yallacompare, adding that the same discrepancy between insured value and selling price was not found on SUVs.
Mr Rawling acknowledged that car dealers could also be over-charging for certain models – specifically sports cars – ahead of the negotiation process. And while insurers are happy to sell policies at a higher premium, he added that they are “more inclined to insure cars with lower values in order to avoid moral hazard” – where someone deliberately damages or writes off their car to get a payout.
Using the data from policies sold via its insurance comparison portal, the company said the discrepancy between sale price and insured valued on some models is "stark".
While a 2014 Porsche 911 Carrera 4’s average insured value sits at Dh215,000, the average cost of this car at second-hand dealerships in the UAE is Dh346,000. Similarly, a 2014 BMW Z4 sDrive 28i has an average dealership price of Dh130,000 - well above the car’s average insured value of Dh108,300.
However, Bill Carter, chief systems and innovation officer of Autodata, a vehicle data company, said it is not only sports car drivers that under insure their cars.
“All drivers want to lower the cost of their insurance premium so that will understate the value of their car,” he said, adding that many insurance companies do not check the value especially at the time of renewal. “They will apply a straight line depreciation of 20 per cent which is not “real life”.
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Autodata provides valuation data to major insurance firms to ensure that the sum insured against a car is correct. Mr Carter agreed that there can also be a risk of moral hazard.
"There is a problem with insurance fraud where people over insure their car then make sure it is damaged beyond repair to claim the inflated insurance," he said.
“When comparing car prices it is important to understand the true nature of the market. Because a car is listed at Dh100,000 does not mean that is its value or that is the final transaction price.”