• Monday, June 24, 2024


Why insurers in UAE refusing to cover Tesla cars

Many insurance companies are opting to only offer third-party insurance coverage to Tesla drivers, reflecting the challenges insurers face in managing the risks associated with these vehicles.

Representational Image (Photo by ROBIN VAN LONKHUIJSEN/AFP via Getty Images)

By: Shubham Ghosh

INSURANCE providers in the UAE are declining to provide fully comprehensive coverage for Tesla electric vehicles due to several factors, including exorbitant repair costs, limited repair expertise, and a surge in accidents.

Issam Mouslimani, a goodwill ambassador in the Middle East for the Chartered Institute of Insurers, said the repair expenses for Tesla vehicles are nearly three times higher than those for an average car, Arabian Gulf Business Insight reported.

Many insurance companies are therefore opting to only offer third-party insurance coverage to Tesla drivers, reflecting the challenges insurers face in managing the risks associated with these vehicles.

Between 2021 and 2023, global premiums for Tesla Model 3s surged by over two-thirds, as reported by the price comparison site Confused.com.

Piyush Dubey, a UAE-based partner with financial institutions consulting practice Kearney’s, was quoted as saying by AGBI, “The fusion of sophisticated electrical systems, driver-assist technology and complex vehicle software has ushered in a new era of challenges in risk assessment and repair costs.”

According to him, insurers charge 12 per cent more to insure an electric vehicle on average but premiums might not still be adequately high because of the additional risk.

The Swiss division of global insurer AXA disclosed that electric vehicles are involved in crashes 50 per cent more than conventionally powered ones, the AGBI report added.

Insurance data indicates a 14.3 per cent rise in accident frequency and a 14.5 per cent increase in claim severity when drivers transition from petrol to electric vehicles.

“The combination of instant acceleration and battery placement appears to be leading to more accidents compared to standard vehicles,” Dubey told the outlet.

“Unfamiliarity with EV driving dynamics also plays a role, especially when drivers first switch from gas to electric.”

According to Mouslimani, the average at-fault claim cost for Teslas, in case the driver and policyholder were responsible for the collision, amounted to AED14,200 ($3,900).

In comparison, the corresponding figures stood at AED4,800 for Mercedes cars and AED3,400 for Toyotas.

“They are generating almost the same amount of premiums, but when it comes to the cost of the claim it’s extremely higher than the other brands and it’s not feasible for insurance companies to underwrite it,” he was quoted as saying.

Taline Vahanian, UAE country leader for placement practice at Marsh McLennan, a professional services company, said the cost of the battery charger in a Tesla car could be equal to half the price of the entire vehicle, significantly raising the potential expenses of a road accident.

“Even a minor collision could cause serious damage, making repairs impossible or costing more than 50 per cent of the vehicle’s value, leading to a write-off,” she was quoted as saying by AGBI.

Alex Malouf, a marketing communications executive based in the Middle East who is also a Tesla driver, said, “You would hope that insurance players such as GIG Gulf, manufacturers such as Tesla, and the government would come together to work out a solution, to help us owners access the insurance we need while also supporting the electrification of the mobility sector.”

The Emirati government is aiming to make half the cars plying on the Gulf state’s streets to be electric or hybrid by 2050.

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