Why Car Insurance Premiums Increased in the UAE in 2025
                     Why Car Insurance Premiums Rose Dramatically in 2025 in 
the UAE?
In 2025, car insurance premiums in the UAE 
experienced a dramatic rise, impacting many 
motorists across the country. This surge in 
insurance costs was caused by a number of 
interrelated factors that brought about significant 
changes in the insurance landscape. 
Understanding the reasons behind this increase is 
essential for drivers and industry observers alike, 
as it highlights the complexities facing the 
insurance market in the UAE.
Unprecedented Flooding 
Impact
A major driving force behind the rising car insurance 
premiums was the unprecedented flooding that struck 
various parts of the UAE in April 2024. These floods 
caused extensive damage to thousands of vehicles, 
leading to a significant spike in insurance claims. 
Insurance companies in Dubai and across the UAE faced 
a surge in payouts due to water damage and other flood-
related incidents. This influx of claims put enormous 
financial strain on insurers, prompting them to raise 
premiums to maintain the financial stability of their 
businesses. Many drivers experienced premium increases 
ranging from 5% to as much as 30%, even if they had not 
previously filed claims.
Rising Cost of Vehicle Repairs
Spare Parts Labor Costs Materials
Inflation pushed up prices of vehicle Higher wages for repair technicians Increased costs for repair materials
components
Another crucial factor contributing to the increase in premiums was the rising cost of vehicle repairs. Inflation pushed up the prices of 
spare parts, labor, and materials needed to fix damaged vehicles. As these costs escalated, insurance companies had to adjust their 
premiums accordingly to cover the higher expenses. This inflationary pressure on repair costs was a significant challenge for 
insurers, which directly translated into higher insurance premiums for drivers.
New Regulations and Increased Accident 
Frequency
Furthermore, the UAE government introduced new insurance regulations in 2025 aimed at enhancing 
the safety and protection of motorists. These reforms included stricter insurance rules, increased 
mandatory coverage limits, and more digitalized claim processing systems. While these regulations 
improved overall transparency and protection for insured drivers, they also increased operational 
costs for insurance companies in Dubai. The compliance with these new rules required greater 
resources and investment, which insurers passed on to customers in the form of higher premiums.
The frequency of road accidents and fraudulent claims also played a role in pushing up insurance 
costs. The growing number of accidents increased the number of claims that insurers had to 
process and pay out, further stressing the insurance market. Additionally, fraudulent claims made 
the situation more complex, forcing insurance companies to raise premiums to protect themselves 
against potential losses.
Electric Vehicles Face Steeper 
Increases
50-70%
EV Premium 
Increase
Significantly higher than traditional vehicles
Electric vehicles (EVs), which have been gaining popularity in the 
UAE, saw particularly steep premium hikes. Insurance companies 
faced new challenges with EVs, as their repair costs tend to be 
higher due to specialized parts and limited authorized repair 
centers. The floods had an even greater impact on EV owners 
because electrical components and batteries require more 
expensive repairs. Consequently, premiums for electric vehicles 
rose between 50% and 70%, making EV insurance significantly 
more costly compared to traditional petrol cars.
COVID Discounts Removed and Reinsurance 
Costs
COVID-Era Return to Normal Premium Climb
RDeidsucceodu pnretmsiums during pandemic Higher travel and reported accidents Costs returned to pre-pandemic or 
due to lower claims from decreased led to removal of discounts higher levels
travel
Another reason for the surge in premiums was the removal of COVID-era discounts. During the pandemic, insurance companies had 
offered reduced premiums due to lower claims resulting from decreased travel. With the return to normal travel and higher reported 
accidents, these discounts were phased out, causing premiums to climb back to pre-pandemic or higher levels.
Reinsurance costs also contributed to the premium increases. Insurance companies rely on reinsurance to protect themselves from 
very large claims. When reinsurance prices rise, primary insurers must pass those higher costs on to their customers, again resulting 
in increased premiums.
Overall Impact on UAE Drivers
The overall impact of these changes has been felt widely by drivers in the UAE. On average, car insurance premiums renewed in 2025 with increases 
ranging from 15% to 20%, and in some cases, as high as 40%. This rise affected not only comprehensive insurance policies but also third-party insurance 
plans. To combat rising costs, some insurance companies are employing advanced tools like artificial intelligence and telematics to better assess individual 
driver risk and tailor premiums more accurately. Safer drivers may benefit from lower premiums, but the base cost of insurance remains elevated due to the 
factors mentioned above.
15-20% 40%
Average Premium Maximum 
Increase
Highest reIpnocrtreed aprsemeium hikes
Typical rise for most drivers
For residents and motorists in the UAE seeking the best options, approaching a reliable insurance company in Dubai is crucial. These companies can provide 
updated guidance on premium rates and help drivers find the most suitable insurance policies amidst the dynamic market conditions of 2025. Car insurance UAE policies 
now reflect a more balanced approach to risks, but motorists should remain vigilant about premium changes and coverage details.
For insurance companies across the country, the above challenges have necessitated premium adjustments to ensure the sustainability of their services while continuing to 
offer protection to motorists. Understanding these factors can help drivers navigate the changing landscape of car insurance in the UAE and make informed choices 
about their coverage moving forward.
Navigating the Future of Car 
Insurance in the UAE