HOW EXTERNAL FACTORS IMPACT THE INSURANCE PREMIUM
We dispelled the widely held assumption that insurance companies set insurance premiums at random in the previous blog post. The impact of customers’ actions on premiums was thoroughly covered in the article. PitStopArabia will continue discussing the many benchmarks used by auto insurance providers in the UAE and around the world in today’s article. Instead of the customer, external variables are the main focus. Let’s get going.
More claims are made as a result of extreme weather than ordinary weather. For instance, the bad weather causes a significant spike in insurance claims during the winter months in Europe. More accidents and claims are a result of snow and ice. Accidents are also more likely to happen in extremely hot weather. Mechanical issues and tyre blowouts are frequent in extremely hot weather. You might find it hard to believe, but insurers utilise this information to calculate the rate. You should anticipate a higher premium if you reside in a location with extreme weather.
Repair costs are increasing without a doubt, just like the price of other goods and services. If the car owner’s claim is accepted, the insurance provider is required to pay for the vehicle’s repairs. It implies that they must pay the repair shop for the work. The insurance company must pay extra due to higher repair costs. They would charge clients more rates in light of this. After all, insurance firms are businesses as well. They would see a decline in profits if they did not raise the premium
If a part of a vehicle is irreparably broken, a spare must be used in its stead. Spare posts can cost either little or a lot of money depending on the type and model of the vehicle. As a result, the premium will also depend on how much they cost. Market dynamics can occasionally cause a rise in the need for replacement parts. These facts are taken into account by insurance firms when calculating insurance rates.
NATURE OF CLAIMS MARKET
Insurance providers maintain records on the characteristics of the claims market. They will examine, for example, how the claim market has changed over the last few weeks, months, and years. It’s possible that claims for whiplash, brain injuries, windscreen damage, etc., are increasing. There are more expensive injuries and vehicle damages than there are cheaper ones. If the claims market shows that they are rising, the premium may also rise because these claims are more expensive for insurance providers.
CHANGES IN LAW
The expenses are also impacted by modifications to the law governing motor insurance. For instance, the UAE government may decide to stop paying out on personal injury claims for extremely minor injuries. This implies that insurance providers in the UAE are not obligated to reimburse claimants for certain claims. They incur less expense as a result, which they could pass along to their customers. A lower premium would be the result. However, the premium will considerably up if the government decides to count relatively minor injuries as personal injury claims.
TAXES AND OTHER COSTS
The UAE government has the authority to decide to impose new fees on the auto insurance industry. As a result, insurance companies would incur higher costs, which they would then pass along to customers. The price would go up. The insurance carriers may pass on the lower cost of doing business to the customers, resulting in a low premium.
NUMBER OF SUCCESSFUL CLAIMS
Expect the premium to rise if there is an increase in the number of successful claims. Insurance firms must provide claimants greater money as a result of more successful claims. On the other side, if claims are low over a long period of time, businesses might pass the savings on to customers.