Al Fujairah National Insurance Co. launches ‘FloodGuard’ in UAE

Unique FIST coverage for third-party insured motorists

Al Fujairah National Insurance Co. (AFNIC) has launched ‘FloodGuard’ – a unique motor vehicle insurance product that covers accidental loss or damage from flood, inundation, storm, and tempest (FIST) for third-party insured private vehicles in the United Arab Emirates.

FloodGuard policyholders can select coverage limits of AED25,000 or AED50,000 for a 12-month term by paying a premium of AED350 or AED550, respectively.

FloodGuard does not replace comprehensive motor insurance, third-party liability (TPL) motor insurance, or statute vehicle insurance. It is only compatible with TPL motor insurance policies AFNIC or other UAE-based insurers issue. FloodGuard activates 15 days after the policy start date,

The launch of FloodGuard comes after tens of thousands of vehicles across the UAE were damaged by floodwaters following an unprecedented rainstorm that inundated parts of the desert nation on April 16, 2024.

A Middle East-first

The newly launched third-party motor vehicle insurance product is said to be the Middle East region’s first such product. It is backed by the Swiss Re, one of the world’s leading reinsurance providers, and insurance and other forms of insurance-based risk transfer.

According to Jayarajan K.K., Deputy CEO of AFNIC, as of mid-2022, the UAE had approximately 3.5 million cars registered. Notably, 53% of these vehicles are over seven years old. This implies that over 1.8 million private cars were covered solely by third-party insurance at that time, K.K. said.

This data made AFNIC realise that the UAE insurance industry had overlooked ensuring third-party insured motorists against flood damages, which became all the more apparent when the April 16 flooding incident affected these motorists, said K.K.

Highlighting the benefits of FloodGuard, K.K. stressed that unlike comprehensive motor insurance, which is based on a sum insured, FloodGuard operates on a loss limit basis. This approach simplifies the insurance process by minimising the information required and eliminating the need for vehicle inspections, all while offering some of the most economical premium levels available.

Crucial coverage

K.K. added that FloodGuard offers crucial coverage for personal or company-owned vehicles used exclusively for personal or leisure purposes, especially those over seven years old, who often do not qualify for comprehensive insurance. The coverage applies to internal combustion engine, hybrid and electric vehicles.

Addressing attendees at the official launch ceremony of FloodGuard in Dubai City on September 16, 2024, Antoine Maalouli, CEO of AFNIC, said: “In response to the recent heavy rains in the UAE, AFNIC’s innovative solution provides much-needed relief to private car owners.

“We are proud to spearhead this groundbreaking insurance product in the UAE. Our commitment is to address our clients’ evolving needs and offer them the reassurance they seek in an ever-changing world,” Maalouli added.

FloodGuard key features

Eligibility: Any private car (personal or company-owned cars used for private & pleasure purposes only – not used for hire or reward) which is not insured or will be insured under a motor comprehensive insurance, whether taken before or after the insurance issue. If the car insured under the insurance happens to be insured under a motor comprehensive insurance, the coverage hereunder ceases automatically. Cars insured under TPL motor policies are eligible to be insured as an independent, separate, standalone flood & storm relief insurance policy parallel to their existing TPL motor insurance. The TPL motor insurance does not need to be with AFNIC. Even if the TPL motor insurance is with another insurer, the policy is still open to such policyholders.

Car/Vehicle: For insurance purposes, the terms car and vehicle mean the same and include saloons, sedans, 4×4 SUVs, and station wagons (excluding goods vehicles, pickups, buses, motorcycles, and other commercial vehicles or vehicles used for hire or reward).

Insurance period: The policy’s period of insurance is 12 months only (not 13 months).

Waiting period: The policy has a waiting period of 15 days from the start date. This means that coverage under the insurance is activated only on the 16th day. There is no coverage during the first 15 days; however, if the policy is renewed next year before its expiry date without a break, the waiting period will not apply to that renewed period.

Flood: An event marked by the rising and overflowing large amounts of water beyond its normal limits, submerging what usually is dry land. It includes inundation (other than tide) as defined below.

Inundation: An event marked by excessive water rising in an existing waterway or waterbody, such as a river, stream, creek, lake, wadi or dam overflowing over an ordinarily dry land, is considered an ‘inundation’ under this policy.

Storm (including disruption): An extreme weather condition marked by a violent disturbance of the atmosphere accompanied by powerful winds, heavy rain, hailstorm, thunder and lightning, and includes tempest, but excluding sandstorm, dust storm and dry storm (dry storm means any storm not accompanied by heavy rainfall in tandem).

FIST weather condition: This means a weather condition marked by the onset of flood, inundation, storm, and temper (FIST), as defined hereinabove (collectively referred to as FIST). After the onset of FIST, the insurance coverage continues until 16.00 hrs (4.00 pm) of the immediate day following the FIST weather conditions cease and return to normal weather conditions. For the FIST weather condition returning to normal weather, the weather data posted/published by the UAE’s National Centre of Meteorology (with recordings closest to the incident area) on their website shall be the basis. Once the weather condition returns to normal weather as per the weather data published on the above-said weather body’s website, the time duration of 16 hours shall start from 23.59 hrs (midnight) of the day the FIST ceased and returned to normal weather. It shall end at 16.00 hrs (4.00 pm) immediately following day. Accidents, weather-related or otherwise, occurring after the above-described 16-hour duration from the day the FIST weather condition ceased and returned to average weather fall outside the scope of the insurance and, therefore, stand excluded. Weather-related accidents occurring within the above-described 16-hour duration until 4.00 pm of the following day are covered under the insurance and subject to an additional deductible of 10% of the claim amount.

Normal weather condition: This means a weather condition that does not assume the proportions of a flood, inundation, storm, or temper as defined hereinabove, and it means the condition of weather prevalent on the days immediately preceding the onset of the FIST.

Loss limit: The policy is on a loss limit basis (not a sum insured). The selected loss limit will be the maximum limit of indemnity available under the policy for the whole period of insurance. Indemnity will be based on the actual repair cost (subject to the deductibles and other terms & conditions of the policy) and that, in the event of a total loss, the actual depreciated market value of the vehicle at the time of the accident; however, not exceeding the insured loss limit. The loss limit available under the policy shall be reduced by the amount of the claim already reported/settled during the policy period unless the loss limit is reinstated at an additional premium (to be calculated) at the time of settlement of the claim. Seeking reinstatement of the loss limit back to the initial loss limit after seven days of the claim settlement date renders the coverage subject to a 15-day waiting period (in respect of the reinstated loss limit portion only) for covering any subsequent accident/s from the effective date of endorsing the policy for loss limit reinstatement.

Calculation of the reinstatement premium upon the happening of a claim incident: The additional premium payable for reinstating the loss limit back to its initial loss limit shall be calculated on a pro-rata basis, only on that portion of the amount of claim settled, to be charged on a total annual basis (not based on pro-rata for the remaining period of reinstated loss limit).

Non-agency repair only: The policy offers non-agency repair coverage only. Repair at the dealer or agency service centres is not covered hereunder.

Vehicle valuation in case of total loss claims: This is derived from an independent online data-based vehicle valuation system of a UAE-registered service provider approved by the company.

Traffic registration (mulkia): It is a precondition that the car has valid traffic registration (mulkia issued by the UAE traffic authorities) at the time of insurance, and its validity shall be maintained throughout the policy period. Therefore, it is in the insured’s interest to keep the mulkia valid throughout the policy period.

Bank mortgage: The policy is not subject to any bank mortgage, hypothecation or lien with any party. The beneficiary under the policy is the insured only and shall be the registered owner of the insured car.

Sale or transfer of the vehicle: Insurance coverage ceases when the car is sold, and ownership is transferred to another party.

No loss of use benefits: The insurance does not provide loss of use benefits of the car by way of delivering any replacement car or rent a car, or daily allowance in lieu thereof, for the time the vehicle has been out of use for any reason

Traversing or crossing wadis, rivers, rivulets, creeks, lakes, dams, canals, channels, beaches: The policy excludes coverage when traversing or crossing wadis, rivers, rivulets, creeks, lakes, dams, canals, channels, or beaches, whether dry or wet.

Wadi: A wadi is a river valley, canyon, canal, or channel (dry or water-laden). It refers to a watercourse, waterways, or wet or dry riverbeds that may contain water when heavy rain occurs.

Weather warning by the authorities: Weather warnings issued by the authorities from time to time shall be followed as far as possible.

Overnight parking in or near wadies or waterbodies: It is a condition of the insurance that the insured car/vehicle shall not be parked overnight in or near the wadis, dams, riversides, beaches or in open areas (open areas affected by flood in the past three years) during the overnight parking hours defined below. Violation of the condition shall render the policy coverage subject to an additional deductible of 10% of the permissible claim amount.

Overnight parking hours: Overnight parking hours are defined as nighttime, starting at 21.00 hrs and continuing until 7.00 hrs the following day.

Desert driving: The insurance excludes loss or damage when engaged in desert driving and dune bashing.

Refund of premium (other than in respect of cancellation due to transfer of ownership): Since the policy has a flat minimum premium, no refund of premium on cancellation by the insured applies; however, if the insurer cancels the policy, the insured is entitled to a pro-rata refund of the premium for the unexpired period of insurance. However, in the case of the vehicle’s ownership transfer, a cancellation refund is subject to the company’s short-period scale, with a minimum of AED200 retained by the company.

Total loss: The vehicle is considered a total loss if, due to an accidental loss or damage caused by an insured peril, it results in any one of the following scenarios:

1. The fixed and irreplaceable parts of the vehicle, such as the chassis or pillars, are damaged and need cutting, tightening or welding as a result of the accident

2. The insured vehicle is damaged and is proven to be irreparable or

3. The costs of repair exceed 50% of the actual depreciated market value of the vehicle or 50% of the insured loss limit stated in the policy schedule, whichever is lesser

If the claim is settled on a total loss basis, the insurer is entitled to take over the salvage, regardless of the vehicle’s actual value, before the loss or damage occurs.

In the case of a total loss of the insured vehicle, the maximum amount payable under the policy shall be limited to 90% of the actual depreciated market value (DMV) of the car (as detailed under the general conditions of the policy) or 90% of the insured loss limit, whichever is lesser. however,

Where the vehicle’s DMV is not less than 125% of the insured loss limit, the total loss claim settlement shall be 100% (without applying the condition of 90% of the loss limit), with the salvage surrendered to the company.

Where the DMV of the vehicle is 150% or more of the insured loss limit, the total loss claim settlement shall be 100% of the insured loss limit (without applying the condition of 90% of the loss limit) or at the option of the insured, the claim may be settled on cash loss basis at a repair cost not exceeding 50% of the insured loss limit without surrendering the salvage to the company, regardless of whether the vehicle is repaired or not.

In the case of total loss or cash loss settlement, the coverage under the policy ceases immediately and is cancelled automatically.

Cash loss settlement: This is a type of claim settlement in which the company allows the claim to be settled in cash without insisting the insured repair the vehicle for that money. The insured can retain the salvage without surrendering it to the company.

Pre-existing & gradually accumulated damage: All gradually accumulated and pre-existing losses and damage stand excluded under the policy.

The FloodGuard policy is only available for four-wheel private vehicles, not commercial vehicles. It can be purchased via AFNIC’s website at afnicfloodguard.ae or through AFNIC’s mobile app. It is also available at AFNIC branches or over 40 authorised outlets, including vehicle testing centres throughout the UAE.

Featured image: The unexpected rainstorm on April 16, 2024, inundated vehicles across the UAE. Credit: Arnold Pinto