December 3, 2019

UAE life insurance sector braced for fundamental shake-up in 2020

Comprehensive new regulations will have significant ramifications for existing players.

The life insurance sector in the UAE will change significantly in 2020 following the issue of comprehensive new life insurance regulations by the Insurance Authority, which come into force on 16 April.

The regulations have wholly laudable intentions and impose controls on the commissions that are payable to "Distribution Channels" (insurance brokers, agents, banks and finance companies), including both caps on the overall amount of commission and the manner in which it can be paid, and also restrictions on the charges (including surrender charges) which insurers can life levy. 

In addition, there are extensive requirements around the information which must be provided to policyholders at the time of purchase and on an ongoing basis. These include disclosure as to the key terms of a product, mandatory product illustrations to demonstrate the potential investment returns for savings products, a mandatory illustration showing the effect of charges and expenses on the performance of savings products, disclosure of the performance of the funds available for investment and confirmation of the “Protection Benefit Ratio” to highlight the extent to which a product does or does not include protection benefits.  Policyholders will also benefit from a “free look” period of a minimum of 30 days during which they may cancel their policy and receive a full refund of their premium.

The ramifications of the regulations for the existing market players are significant and, in the short term, we predict that they will lead to a shortage of products, the closure of some specialist life insurance brokers and a withdrawal of the banks from the sector (thereby limiting distribution capacity), together with a movement by advisors to promote other forms of investment products.

Read the rest of our insurance predictions here.