19 Nov 2019
UAE: Authorities Issue New Life Insurance, Family Takaful Rules
The Insurance Authority (IA) of the United Arab Emirates (UAE) has released new regulations covering life insurance and family takaful operations after three years of public consultation. Upon publication in the Official Gazette, the regulations will become law, although the draft does allow a two-year alignment period for firms to put various provisions in place.
According to Sultan bin Saeed Al Mansouri, UAE Minister of Economy and the Chairman of IA, the new regulations will provide greater transparency, contribute to a qualitative leap in life insurance market regulation, and increase insurance penetration in the UAE. Industry stakeholders and analysts have generally been supportive, commenting that the new regulations should better protect policyholders and ensure that they receive value for money. Nigel Green, founder and CEO of deVere Group, an international financial advisory firm, said: "We support the UAE authorities' commitment to the country's vital financial services sector. Their proactive stance further protects clients and makes the industry itself more robust."
Central to the new law are regulations requiring better disclosure of terms and conditions; guidelines on projected returns claimed; and caps on commissions paid to financial intermediaries selling IA-regulated life insurance products. For offshore bonds and lump sum portfolio bonds, there is now a sales commission cap of 4.5% of the modal annualised premium (MAP) multiplied by the number of years in the policy term.
The maximum commission payable on pure protection products will be 10% of the MAP multiplied by the number of years in the policy. For single premium policies and ad-hoc premiums, the maximum commissions paid must also not be more than 10%. These new commission caps will apply to all types of life insurance policies, regardless of whether they are sold to individuals or groups; their policy terms; or their distribution channels.
Furthermore, commission payments can no longer be paid up front, but must now be paid out piecemeal over the term of the product. The new regulations also provide guidance for clearer definitions, terms and conditions in life insurance policies; including for the premium, the amount insured, charges, expenses, and an annual statement of account for each policy. A 30-day cancellation period at the start of any new policy is also mandated.