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One of the key initiatives for the UAE insurance sector this year has gone live, in the form of the Involuntary Loss of Employment scheme. Image Credit: WAM

Dubai: Employees in the UAE can get themselves some additional income protection from today, with the ambitious Involuntary Loss of Employment (ILOE) scheme going live. Taken together with the mandatory contributions that employers have to make towards their staff’s gratuity schemes, the new insurance cover provides employees that additional safety net if hit by a sudden loss of their job.

Crucially, the ILOE policy assures them of funds to cover the first three months of the job loss, without having to dip into their gratuity payments. More so, if the gratuity needs to be used to pay off any outstanding loans the individual may have. This will become particularly useful as the individual works on alternate plans for his/her immediate future.

“This scheme will not replace any other law or coverage,” said a spokesperson for Dubai Insurance. “This is a unique standalone insurance scheme.”

Dubai Insurance is the authorized insurer to issue ILOE policies on behalf of the ILOE Insurance Pool. No other insurer can issue this policy.

“The subscription will start as of January 1, 2023.” UAE Nationals and expats come under the ILOE cover.

If a job loss happens, compensation will be paid to the individual within two weeks from the date of the claim and capped at a maximum of three months per claim. Employees are eligible for compensation if they have worked and subscribed for at least 12 months to the scheme. And as long as they have not been dismissed for a disciplinary reason or have resigned to pursue better opportunities.

Along with the upcoming law for mandatory health insurance for all UAE residents, the ILOE represents one of the biggest initiatives the local insurance market will witness this year.

What will the individual get under ILOE?
* Eligible employees can get a cash compensation of 60% of their average basic salary in the last six months prior to the job loss.

* The cash compensation will be for up to three months if you have been subscribed to the scheme for twelve consecutive months at least.

Part of bigger changes?

According to insurance industry sources, the loss-of-job cover should be seen as part of the wider reforms that are being introduced in the employment space. Dubai had last year expanded its pension scheme beyond those companies operating at DIFC to cover employees working at all government enterprises. The scheme has employees making pension contributions as per their requirements.

Then, there was National Bonds with its ‘Golden Pension’ plan launched in October, whereby expat employees could make monthly contributions starting from Dh100.

“With ILOE, more protection is being built in for expat workers, to see through the first three months after a sudden loss of job,” said an insurance industry source. “This period tends to be the most difficult - with ILOE, they are assured of defined funds coming their way when they need it most.”

Paying for the job loss cover

The unemployment insurance scheme comes under two categories – the is first for those with a basic salary of up to Dh16,000. The insurance premium cost for employees is set at Dh5 per month or Dh60 annually.

The second category is for those with a basic salary exceeding Dh16,000, and the premium cost is Dh10 a month or Dh120 annually. The premium payment can be made by the employee monthly, quarterly, half-yearly, or on an annual basis. (The value of the insurance policy is subject to VAT).

“This creates a safety net that supports workers in their career path and ensures their livelihood by relying on mechanisms that do not incur additional costs for employers,” said Leena Parwani, founder and CEO of LPH Financial Group.

“This provides a balance in the job market that allows for achieving the UAE’s strategic goals and supporting the continuity and growth of economic activities.

“At a rate somewhere between Dh60 to Dh120 per annum, the total unemployment insurance premium from around 5.5 million employees could generate Dh400 million as additional premium to the UAE’s insurance pool in 2023.”

Covid times

In the immediate period after the 2020 COVID-19 strike, a handful of insurers in the UAE had introduced or marketed aggressively job loss protection schemes. But take-up rates were muted, and by 2021 most of these policies had been withdrawn.

But with ILOE, things will be different. “Being a government mandate, the ILOE offer a real option for employees who will need short-term funds in case of a sudden job loss - and on premiums that are affordable,” said an insurance industry official. “Earlier job loss themes from select insurers carried too high a premium. In this regard, the ILOE scheme brings a new dimension.”

A view echoed by Leena as well. “In times of crisis, such as the COVID-19 pandemic, which resulted in job losses, expat employees had to cancel their visas and leave the country within a few weeks. The unemployment insurance would make a significant difference in their lives under the such period of uncertainties.”

Use these channels to pick up job loss cover
* Directly from Dubai Insurance, via the ILOE portal and ILOE mobile App

* Exchange centers such as Al Ansari

* Telecom bills


* ATM machines/Bank apps

* Business centers

* Kiosks such as UPAY