Abu Dhabi motor insurance companies opened a new chapter in their businesses when a plan to access drivers’ information from a single database was announced. Insurance companies usually collect and store the personal information of individuals to whom they provide insurance cover.
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Accessing drivers’ information before offering them insurance cover will allow companies to decide the amount of premium to charge based on their past records. In that regard, the database will provide information that will help insurance companies to determine the level of risk associated with each applicant (Ruiz, 2014). Insurance companies have relied on vague information such as age and the nationality of applicants to issue insurance cover for many years.
However, a centralized database will provide accurate and adequate information that will improve their operations. It will also improve road safety, reduce the number of fraudulent insurance claims filed by drivers, and enhance the process of determining the amount of premiums that applicants should pay (Ruiz, 2014). Careful drivers will pay low premiums while careless drivers will pay higher premiums. The data system will improve fairness because reckless drivers have been paying low premiums at the expense of careful drivers.
I think that a common database will improve the operations of insurance companies by enabling them to issue insurance cover that is commensurate with the risk associated with different drivers. In addition, it will improve their profitability. Many insurance firms lose a lot of money because many drivers provide erroneous information in order to pay lower premiums.
For instance, some individuals change their insurance companies after they get involved in road accidents because such occurrences usually result in higher premiums. Companies will not lose their clients due to fraudulent transactions that are usually initiated by reckless drivers. Insurance companies will benefit from access to accident histories of drivers who apply for insurance cover.
They will get information about the number of accidents a driver has been involved in, the repairs done on their vehicle, and any insurance claims filed against their insurer (Ruiz, 2014). On the other hand, centralization of insurance information is a positive move that will save insurance companies a lot of money that is lost through fraudulent claims.
According to the article, there are 35 companies that offer motor insurance and approximately 20 have agreed to share their information through a centralized database (Ruiz, 2014). Companies compete effectively in different markets due to their competitive advantages that are confidential and unknown to other firms.
Requiring insurance companies to share information with others could cause resistance among some firms because of the unwillingness to expose their operations to competitors and government agencies. Some companies might fear that sharing information could lead to loss of clients.
Dubai’s Roads and Transport Authority has presented a mandatory request to all insurance companies to prepare and issue data to the common database (Ruiz, 2014). Many companies that engage in illegal financial transactions keep their operations private for fear of exposure. Sharing information with other companies and government agencies could expose companies that might have been involved in illegal activities while addressing claims filed by clients.
Lack of transparency and accountability is one of the major challenges that insurance companies face. Clients provide misleading or prevaricated information in order to pay lower premiums. Lack of adequate information renders insurance companies unable to determine the real value of premiums that drivers are required to pay because they cannot determine their risk levels on the road.
I think it would be irrational for some companies to reject the plan to share information with other insurance firms because the move has many benefits. Companies that have agreed to share information are aware of the benefit that they will enjoy by getting unlimited access to applicants’ profiles before issuing them with insurance cover.
Drivers will be compelled to provide accurate information that matches their profiles in the database. On the other hand, insurance companies will be compelled to address all cases of insurance claims in a transparent and just manner because government agencies such as the UAE Insurance Authority will be accessing information related to their operations.
A centralized database containing drivers’ information from different companies will improve the credibility and integrity of insurance companies. This is possible because some companies support the involvement of government agencies in overseeing the activities of insurance companies. For example, the chief executive officer of Guardian Insurance Brokers supported the involvement of the UAE Insurance Authority in the resolution matters related to insurance (Ruiz, 2014).
If government agencies are involved, companies will be more transparent, corruption will reduce, and clients will be treated fairly. On the other hand, drivers will not swindle insurance companies because information regarding their histories will be used to determine whether their insurance claims are legal or illegal.
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Enhancement of honesty and transparency will improve relationships between drivers and insurance companies. It will also oblige drivers to be more careful because they will have no illegal means of altering their premiums by providing incomplete or false information to new insurers. The use of driving license and vehicle chassis number to retrieve information regarding claims will streamline the operations of insurance companies, increase efficiency, and make work easier.
The move has been welcomed by many insurance companies because of the efficiency and effectiveness a centralized database will offer. However, it could also increase illegal use of people’s information. Corruption cases are on the rise among insurance companies and some could use the new information for selfish gains.
On the other hand, there is no guarantee that the new system will streamline business operations because insurance companies have been accused of using dubious techniques to avoid paying insurance claims to clients. There is a possibility that companies will collude with each other in order to reduce their operation costs and increase the premiums paid by certain drivers. There is no assurance that the system will be transparent and fair.
Companies operate differently due to variations in their organizational structures and designs. Some companies possess more detailed information regarding their clients than others. Therefore, certain firms will benefit more than others. The creation of a centralized database seems beneficial to the operations of insurance companies. However, it will give certain companies a competitive edge over others because of unlimited access to information that many of them did not spend money collecting through research.
On the other hand, sharing information should be optional because some companies’ policies could be against sharing their clients’ information. Relationships between customers and companies are very important and comprise a major pillar of organizational success. This move could compromise these relationships because certain clients might feel violated and as a result decide to change their service providers.
Ruiz, R. (2014). UAE Insurers Can Now Use Single Database for Drivers’ Data. Retrieved from https://www.thenational.ae/uae/insurers-can-now-use-single-database-for-drivers-data-1.445219