Dubai: The status quo is to continue on the insurance premium collected by brokers from clients and which they need to deposit with the concerned insurance companies. This is as per the newly issued UAE insurance law for brokers, which has gone in for far-reaching changes on paid-up capital requirements and bank guarantees that brokerage firms must adhere to.
But on the issue of premium collection and deposit with insurers, the new law does not stipulate any change. These transactions will continue to be governed by the terms of agreement brokerage firms enter into with each individual insurer.
Currently, premium deposits on policies are set at between 30-90 days on average with the concerned insurer. These are based on long-standing arrangements and is now set to continue.
The rule states: “Among the broker, its client and the insurance companies [there should be] a written commitment to identify the power of the broker. This identifies the technical/legal commitments from the broker toward the insurance authority.”
Law
The passage of the much anticipated law thus lays to rest concerns within the industry that set limits would be put in place over the premium deposit period. Many brokers felt that setting timelines would needlessly impinge on a process that has worked in fine fettle over decades.
The French insurance giant AXA has a process set in stone on premium collection — “If clients or brokers do not pay, we do not cancel the policies as we are not allowed to do so, however we stop paying the claims and stop issuing any other policies to intermediaries,” said a spokesperson. “For all individual policies it is paid in cash, so we do not have these issues.
“For commercial policies, on medical it is 30 days before stopping the claims and on non-medical, the maximum is 60-90 days before stopping the claims. Then, if the issue is not quickly solved, we can take legal action.”
There was move from within a section of the industry in 2011 to impose a blanket upper limit of 90 days on premium deposits with the insurer. That was stiffly opposed by the broker community and was eventually dropped.
Key features
Earlier this month, a similar move was made to revive the 90-day payment timeline and with the caveat that those claim premiums which were not made would not be honoured. Moreover, for motor and health care claims, the premiums had to be paid within 30 days.
“The Insurance Brokers Law retains some of the key features that have governed insure-broker relationships in the UAE over many years and with a proven track-record,” said Mustafa Vazayil, managing director of Gargash Insurance Services.
“On many other changes such as paid-up capital and professional indemnity requirements, the Law raises the minimum limit and that is to the good — it will mean only well-capitalised brokerage firms can operate in the marketplace. In fact, the financial commitments could even have been higher.”
The new paid-up capital for a broker is Dh3 million against Dh1 million earlier. Brokerages have also been freed to open branches, which will go some way to bring about more depth to the market from a customer facing perspective. To get the approval for a new branch, the firm must show a premium generation of Dh3 million from the existing office.
