The New life insurance regulations in the UAE came into effect from 15 October 2020. These regulations reduce the broker’s commission. In the first year, the commission reduces to 10% from 40%-70%. This is good for the person who took insurance and also for the beneficiaries. In the coming months, the insurance market is expected to increase up to Dh 9.5 billion.
Life insurance is the first priority to purchase for almost 50% of the population in the UAE after the pandemic attack. There are many important changes that are taking place in the insurance sector in the UAE. The regulations in the Insurance sector are issued by the Insurance authority it came in the year 16 April 2019. The regulations which are imposed issue control over the insurance agents, brokers, finance companies, and lending institutions. Regulations on the commission, restrictions on the charges, insurance surrender charges, and other guidelines have been issued. A survey report admits that half of the survey population were willing to buy insurance online. The insurance growth is expected to increase from 1.8% to 1.9% until 2024.
Highlights of New Life Insurance Regulations
- The New life insurance regulations cut down the life insurance commission. It will make it unattractive for the brokers who sell the insurance policies.
- The new life insurance regulations have become more clear and transparent.
- The New life insurance regulations are made to ensure that life insurance is customer-centric and insurance is cheaper and affordable to everyone.
- The New regulations are more attractive to the expats to buy insurance in the UAE than in their home countries.
- With the new regulations, it is expected that life insurance may increase going further
- The new regulations may severely impact the brokers and the brokers may lose their income and run out of business.
- The UAE Insurance authorities board of directors made the new life insurance policies more transparent.
- With the latest regulations insurance has become cheaper so that everyone can afford to purchase.
- The insurance companies are made more accountable and responsible to the customers.
- Earlier life insurance was the most misunderstood concept, the latest developments in life insurance have ensured that mis-selling of life insurance policies can be stopped.
- Misguiding the customers on insurance products and making a sale can also come to an end.
- Educating the customer and focusing on sharing knowledge is made possible with the latest regulations.
- The risk coverage, insurance premiums, fees, commission and other aspects have been covered under the regulations.
- Greater focus and attention has been given to policyholder life protection. It ensured that new insurance policies provide full disclosures in the insurance policy.
- A free look period of 30 days is included in the new regulations. If the insurance policyholder does not wish to continue then the insurance company is bound to pay a premium in full to the customer.
How does it affect customers and brokers?
The new life insurance regulations provide more transparency to the clients. It provides them with a clear idea about the commissions which are paid to the advisors and complete details of the expenses. The disclosure is the most important requirement as the customers can get to know the full details of products, services, and their associated fees.
Before the new regulations came into effect the customers were unaware of the fees and performance of their life insurance. Now the customers will get a free look period of thirty days, they get ample time to read and understand the policy. If a customer is unsatisfied with the product they can surrender the policy within the thirty days period.
The financial experts say that restrictions on the commission and adding the indemnity commission will encourage the insurance advisors to provide efficient service to the customers. It is better for the policyholders as it provides a facility to get prompt services from the insurance companies. There is a higher discipline and increased trust with the new life insurance regulations.
The life insurance market is operated by brokers and brokerage firms. Most of the brokers are not salaried employees and they earn a commission for survival. The brokers earn higher commissions on the first premium and then it provides 2%-5% on yearly premium. The new regulations encourage the performance-based commission. The broker’s commission will be highly affected and may go out of business.
Increased transparency and protection
The new life insurance regulations are intended to increase transparency and give protection to customers. It is expected to increase life insurance penetration which is low at 0.7% of the total UAE population.
The customers can get greater benefit with reduced chances of malpractices. The regulations have made life insurance more organised and professional. There is a greater competitive environment with the advent of new life insurance regulations. Since there is higher transparency in the insurance market, mis-selling and misleading customers can be reduced with the latest developments.
Educating the customers and sharing knowledge will reduce misunderstandings about life insurance products. This will enable participation from the customers to buy life insurance products and services.
Earlier, customers would not have known what kind of insurance policy they are getting from the company but now they will get a chance to choose the options and decide on the preferences for buying the life insurance.
The new regulations are clear and tell companies to disclose the complete details about the policy so the customer can have clarity prior to the purchase. Most of the advanced countries such as the USA, UK, Australia, and other countries use similar life insurance regulations that provide transparent services to the customers.
In the UAE there are 62 active insurance companies and from them, 12 are active in selling life insurance products. The new life insurance regulations have been streamlined to provide greater transparency to the customers. With the new regulations, life insurance products would become cheaper and affordable. The new regulations give complete insurance cycle details to the customer so that customers can know the benefits of their premium amounts that are spent. The thirty days free look period will provide enough time to get information about the policy.