UAE:New life insurance rules to be gazetted "imminently"

The UAE Insurance Authority's (IA) much awaited new regulations for life insurance and family takaful are expected to be published in the Official Gazette imminently and take effect six months thereafter.

The new rules will see greater disclosure for customers and commission caps applied on the sale of protection products including fixed-term savings plans, reported The National. Commission payments must made over the term of the product rather than upfront.

The set of regulations has been in draft form since November 2016. “The provisions of the instructions herein shall apply to the companies, distribution channels and any other insurance-related profession regulated by the authority,” the IA said in its Decision Pertinent to Regulations for Life Insurance and Family Takaful document published on its website.

Mr Peter Hodgins, an insurance lawyer and partner at the global law firm Clyde & Co in the UAE, expects the effective date of implementation as being in mid-May 2020. “The regulations are a welcome (and, given the two year gestation period, long overdue) reform to the life insurance industry in the UAE," he said. "The focus of the regulations is clearly to protect policyholders and ensure that they receive value for money from the products that they purchase."

Many UAE residents have been burnt by buying long-term savings or lump-sum products sold by financial advisers that seemingly offer attractive returns, only to find early gains eaten up by commission fees, and they are unable to exit the plans without paying the full charges of the product. “It is clear from the regulations that the restrictions on commissions are intended to apply in respect of all fees and charges, however described, that are paid to the distribution channel (insurance brokers, insurance agents and banks),” said Mr Hodgins. “Access fees paid to banks for multiyear distribution arrangements, for example, will be deemed to form part of the bank’s commission from the effective date.”

Another point of note, he added, is that any rebates or refunds received by an insurer or a distribution channel, such as a financial adviser, from a fund manager or any other third party “must paid to the customer and not retained by the insurer or the distribution channel”.

The new regulations also provide for a “free-look” period of 30 days, where the insurer is required to offer a full refund if the buyer wishes to cancel a policy, as well as extensive product illustrations for new policyholders at the time of purchase. The IA first declared its intention to overhaul the industry in November 2016 in response to an “alarming” number of complaints.

Source: Middle East Insurance Review