New Motor Insurance Policy Framework in UAE Defines Premium Caps and Policy Obligations

Renewing car insurance in the UAE can often leave motorists wondering why premiums vary widely between insurers, even when the level of coverage appears similar. However, the country has a clearly defined regulatory framework governing what a motor vehicle insurance policy must include -- and how much insurers are permitted to charge.

 

A unified framework for all insurers
 

Motor insurance in the UAE is governed by the Unified Motor Vehicle Insurance Policy, issued under Insurance Authority Board Decision No. 25 of 2016, alongside Decision No. 30 of 2016, which regulates motor vehicle insurance tariffs. Together, these decisions standardise the terms, conditions, obligations, exclusions, and pricing rules that all insurers must follow.

 

Under this regime, every insurer offering motor policies in the UAE must comply with mandatory clauses relating to:

 

1. Obligations of the insurance company

These include compensating the insured for damage covered under the policy, repairing the vehicle, or replacing it when necessary.

 

1. Obligations of the insured

Policyholders must pay premiums on time and take reasonable precautions to protect the vehicle. They must also ensure proper ownership and updated documentation.

 

1. Exclusions

The unified policy clearly lists cases where claims will not be covered, such as:

• Damage caused by overloading the vehicle
• Losses arising from indirect causes
• Accidents involving a driver without a valid licence
• Accidents occurring outside the geographical limits specified in the policy

 

1. Recourse and termination clauses

Insurers are allowed to seek recourse against the insured in specific circumstances -- for example, when a claim arises from fraud or violation of policy terms. The law also governs how and when a policy may be terminated.

 

Optional coverage allowed under the law

Although the unified policy sets the minimum mandatory coverage, insurers and policyholders are free to agree on additional benefits, provided they fall within the regulatory framework.

 

Clause 5 of Chapter One of the Unified Motor Vehicle Insurance Policy states that insurers may offer extra coverage through riders in return for an additional premium. These optional add-ons may include:

• Cover for damage to the insured’s own property or belongings
• Cover for damage to items in the driver’s possession or custody
• Cover for risks occurring off-road

 

This provision explains why quotes for similar base coverage may still differ -- insurers can bundle optional benefits, enhance coverage limits, or apply varying risk assessments.

 

What UAE law says about premium limits
 

Despite variations in optional coverage, there is a legally mandated cap on how much insurers can charge for basic motor insurance.

 

Under Decision No. 30 of 2016 on Motor Vehicle Insurance Tariffs, insurers may charge:

• Up to five per cent of the vehicle’s value for saloon cars
• Up to seven per cent for four-wheel drives
   

These limits apply to the standard 13-month policy, which includes a one-month grace period for registration renewal.

Insurers must keep premiums within these ceilings. However, within that limit, pricing can fluctuate based on factors such as the driver’s history, vehicle age, previous claims, and any additional riders.
 

Bottom line: Why your premium may differ
 

While UAE law imposes strict rules on policy wording, exclusions, and maximum premiums, insurers retain some freedom to:

• Assess individual risk factors
• Offer varied add-ons
• Provide flexible coverage options
• Apply discounts or loadings within the permitted tariff range

This is why motorists may see different quotes for seemingly similar coverage. Understanding the legal framework can help car owners compare policies more effectively and ensure they are not charged beyond the regulated tariff.

 

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