Can insurers recover the full sum insured from the defaulting party?
What is the role of agency repair in such a case?
Let's discover that…
In order to strengthen the protection and ensure the safety of lives and property on the road, the Emirati legislator has enacted many statutes:
· UAE RTA law: All vehicle owners must get car insurance cover
· Article 46 of traffic law no. 1 of 1968: It is compulsory to have a car insurance policy against death or injury in order to be legal to drive a car on the road
Thus, getting a car insurance policy is essential, the policy extends financial protection to your vehicle, if any accident occurs; the insurance company pays for the repair work for your car due to the accident.
Stability in UAE insurance market via unified motor vehicle insurance policy
For more transparency in the UAE insurance market, the insurance authority has issued ‘Unified motor vehicle insurance policy against loss and damage under resolution No. 25 of 2016 of the insurance authority board of directors.’
This was put in place to limit the speculation policy and the price differences between the companies, it adopted the maximum and minimum price mergers, extended protection to both the rights of policyholders and the interests of the insurance companies, and strengthened the market competition of the UAE insurance industry.
In order to compensate the insured for any costs incurred as a result of a vehicle accident, once the insurer's insurance cover provides for accident repairs which are less likely to impair the residual value of the vehicle, the insurer shall bear the financial cover for the repairs required as a result of accidents involving the vehicle.
What are the specific rules if the insurer bears the agency repair cost?
Insurers obligations
The insurance company shall bear the repair costs of any damaged part of the vehicle for the first year of use and registration in accordance with the agency's repair prices.
Now you may ask, what is the concept of agency repairs?
Or
What are the basics for calculating the price of repairs?
Let's discover the answers to such questions…
1. Agency repairs concept
In agency repair, you can take your vehicle to the authorized workshop of the dealer to repair any damage due to an accident and ensure the authenticity of the used parts.
Note: Choosing a local repair shop is a more expensive but quick-fix option.
2. Basis of repair calculations
According to ‘Unified motor vehicle insurance policy’, if an accident occurred during the first year of the insurance coverage, the insurer would be obliged to repair the damaged vehicle and expenses are according to the price estimated by the repair shops which should be approved by the insurance company.
If the estimated repair costs do not exceed the value of the repair agreed in writing with the insurance company,the insured may also assume the repair of any damage to the insured vehicle.
It is also good to note that the policy holder can add agency repairs as a clause in the insurance policy, which will lead to extra charges.
It depends on your risk capacity to decide whether to include agency or non-agency repairs.
So, here is a question for you…
Do you prefer keeping the cover to a bare minimum, if you assume the low probability of something going wrong?
OR
Are you cautious about leaving nothing to chance?
Now, let's move to…
Insurer Guarantees
The insurance company shall ensure that the repair shops warrant proper operation for the repair of the vehicle.
The insurance company shall also ensure that the insured is in a position to have the vehicle inspected by the'Approved Motor Vehicle Inspection Agency in the UAE' in order to ensure proper repair of the vehicle without affecting the technical examination of the damaged motor. The repair costs should not exceed 50% of the vehicles value.
What about the total cost?
Suppose the value of the repair reached 50 percent of the market price of the car or it became irreparable.
In that case, the insurance company shall compensate the insurer for the total loss on the basis of the vehicle being insured for the value agreed between the insurer and the insured. A deduction of 20 per cent of the depreciation percentage from the value is the basis for calculating the compensation for the loss and damage insured here.
What is the right of recourse against the party defaulting?
The insurer has the right to appeal for compensation against the defaulting party or the insurance company which insures the car of the defaulting party.
Under the provisions of the Unified Motor Vehicle Insurance Policy, what is the depreciation amount?
The maximum deductible amount is fixed on the basis of the value and type of the vehicle. Shall we check the meaning of depreciation?
Depreciation is the amount of money deducted from the exact amount paid, which depends on the use of the car.
The primary role of the insurance policy is to restore the insured car to its condition before the crash
Let's see the percentages of depreciation…
Private motor vehicle parts:
First year 0%
Second year 5%
Third year 10%
Fourth year 15%
Fifth year 20%
Sixth year and above 30%
Taxis, public transport and rental vehicle parts:
In the last six months of the first year 10%
Second year 20%
Third year 25%
Fourth year 30%
Fifth year 35%
Sixth year and above 40%
Let's look at the damaged components required to be replaced without depreciation deduction:
· Glass
· Brake master cylinders
· Brake wheel cylinders
· Brake calipers
· Brake cables (conduit type)
· Brake hoses
· Brake diaphragms
· Steering boxes
· Steering rakes
· Steering ball joints and swivels
· Seat belts
Car insurance is essential for drivers in the UAE, since it provides policyholders with safety and protection measures.
If you need further advice regarding car insurance policies, feel free to contact the FTD Partners Team.
