EXTERNAL FACTORS IMPACT THE INSURANCE PREMIUM
In the previous blog post, we disproved the commonly held belief that insurance firms randomly decide insurance premiums. In-depth coverage of how consumer behavior affects premiums was provided in the article. In today’s piece, PitStopArabia will continue to go through the various standards that auto insurance companies in the UAE and around the world utilize. The primary focus is on external variables rather than the client. Let’s move forward.
Extreme weather causes more claims than typical weather does. For instance, in Europe, the winter months see a sharp increase in insurance claims due to the harsh weather. Snow and ice cause more accidents and insurance claims. Internet marketing excessively hot conditions, mechanical problems and tyre blowouts are frequent. It may be difficult for you to believe, but insurers use this data to determine the premium. If you live in an area that experiences extreme weather, you should plan on paying a higher premium.
Unquestionably, repair costs are rising, just like the cost of other goods and services. If the car owner’s claim is approved, the insurance company must cover the cost of the repairs. Installation servicesare implied to be responsible for paying the repair shop. Due to increasing repair expenses, the insurance company is required to pay more. In light of this, they would charge customers more charges. Insurance companies are businesses, after all. If they did not increase the premium, their profits would fall.
A spare part must be used in the event that a vehicle component is severely damaged. Depending on the make and model of the car, spare posts can be cheap or expensive. Therefore, the cost of them will also affect the premium. The demand for replacement parts can occasionally increase due to market factors. When determining insurance rates, insurance companies consider these facts.
NATURE OF CLAIMS MARKET
Insurance companies keep track of the details of the claims market. For instance, they will look into how the claim market has evolved over the past few days, weeks, months, and years. It’s probable that more people are filing claims for whiplash, brain injuries, windscreen damage, etc. There are more expensive automobile damages and injuries than there are affordable ones. The premium may increase if the claims market indicates that they are increasing because these claims are more expensive for insurance companies to pay out.
CHANGES IN LAW
The costs are additionally impacted by changes to the law governing auto insurance. For instance, the UAE government may decide to stop covering claims for very small injuries in personal injury cases. This suggests that insurance companies in the UAE are not required to pay claimants back for specific claims. As a result, they spend less money, which they might then pass on to their clients. The effect would be a lesser premium. However, if the government decides to treat relatively small injuries as personal injury claims, the premium will increase significantly.
TAXES AND OTHER COSTS
The UAE government has the power to decide whether to charge the vehicle insurance market new costs. The effect would be higher expenses for insurance firms, which they would then pass on to clients. The cost would increase. The lower cost of conducting business may be passed on by insurance carriers to the clients, resulting in a low premium.
NUMBER OF SUCCESSFUL CLAIMS
If there is an increase in the number of successful claims, the premium will likely increase. As a result of more successful claims, insurance companies are required to provide claimants more money. On the other hand, firms might give the savings to customers if claims are minimal over a lengthy period of time.