UAE Insurance Authority announces widely-anticipated legislation
The UAE’s Insurance Authority has released the details of the ‘Decision Pertinent to Regulations for Life Insurance and Family Takaful’ in English.
The legislation was initially released several weeks ago in Arabic. Upon the publishing of the legislation in the Official Gazette, firms will have six months to put it in place.
Walter Jopp, chief executive of Zurich Middle East, has said of the legislation that “the single biggest piece of legislation that we’ve seen in the market,” according to a report by International Adviser.
The legislation has stated that commission limit rules apply to all types of life insurance policies, whether sold to individuals or groups, regardless of the policy term and distribution channel.
It has also introduced caps on indemnity commissions: First-year commissions shall be capped at 50% of the annualised premium or 50% of the total commissions payable under the insurance policy; The remaining commissions shall be paid out equally over the remaining premium payment term. For premium payment terms of 20 years or more, the actuary may propose a non-equal payment method, and the first-year commission will be subject to commission claw-back during the first five years of the policy at a minimum.
The payment of fees, under the new policy, to any distribution channels are allowed provided that the client is fully aware of the fees, the fees are part of total commissions, and the fees are not recouped from the offered product.
The IA has also set up a free look period of at least 30 calendar days, which must be provided to the policyholder, beginning from the earliest date out of either date of the issuing of the policy, the date when coverage commences, or the date when the policy documents are signed by the client.
The legislation goes on to outline policies regarding client documents, the need for firms to provide historical performance documents, and, should firms not comply, establishes the consequences of ‘penalties’, the nature of which have not been further elaborated upon.
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