Dubai: The UAE Insurance Authority (IA) in its latest draft regulations said it plans to limit the fees charged along with better disclosures in a bid to protect the policy holders.
The regulator said it plans to limit the fees and commission charged to policyholders, stipulating a free look period, along with provision for more disclosures, including historical performance of the funds to the policy holders.
“They are trying to evolve regulation to get better customer outcomes. At Zurich, we continuously aim to improve our solutions and services to benefit our customers and adhere to all local regulatory requirements,” Walter Jopp, Chief Executive Officer, Zurich Middle East, told Gulf News.
Previously, most of premium was used to pay for commission payout and other fees and was not invested in the first year of the policy, which elongated the time period of the investment into the funds.
“This is one “small” step in the right direction as it ensures that clients earn better returns on their investments & a lower incidence of inappropriate sales. This will also curb the excesses in the local insurance industry and bring it slightly closer to global standards,” Preeti Harrison Bhambri, Head of Sales, Middle East at WeInvest Robo-Advisory Solutions said.
The regulator has stipulated the maximum payable Commission at 10 per cent and that should be based on the maximum annualised premium collected, it said in its third version of the draft regulations proposed for insurance and family takaful companies. Overall the first year’s commission must be capped at 50 per cent of the annualised premium or 5 per cent of the total commission payable whichever is less.
The body has also asked insurance companies for all disclosures on fees, and not to recoup it from the product offered. A Free Look Period starting from the date of the policy issuance of at least 30 calendar days must be provided to the policyholder. The insurance company should refund the full premium in case of surrender within the said period.
The regulator has also asked insurance advisers to apply for licenses, that will be issued by the IA.
They have introduced “a new licence category of investment adviser which is a recognition by the regulator of the important role financial advice plays in increasing the understanding of these complex products in the UAE market,” Tom Bicknell, a partner at Law firm Pinsent Masons LLP said.
Jopp said it was too early to comment on how the regulations would impact the industry.
“Evolving regulation result in better customer outcomes. As a global insurer we have experience of regulations across many markets. Zurich complies with all regulators in the areas in which it operates globally,” Jopp added.
What has changed for policyholders?
According to the draft regulations, there is an overall cap of 90 per cent on commissions of regular premium savings products. This is usually calculated as a percentage of the first year premium paid by the client. Currently, as per market norm, this can go as high as 150 per cent which essentially means that insurers pay the first 1.5 years of premium paid by the client as a commission to their agents.