UAE’s ‘game-changing’ life industry overhaul given green light

The United Arab Emirates’ insurance industry regulator has decided to go ahead with a planned overhaul of the way life insurance products are marketed and sold in the jurisdiction, as industry observers had expected it would.

The package of new regulations includes a ban on indemnity commissions, as well as fee limits, new charges on life insurance products, and new rules affecting financial advisers who sell insurance products in the UAE.

At least one adviser says the document reveals the regulator to be pushing ahead as planned, “without pulling any punches” and undeterred by those industry players that have sought to have the changes brought in more slowly.

The announcement of the decision to go ahead with the package of new regulations, which also cover the takaful industry, was contained in a draft circular published two days ago on its website by the UAE Insurance Authority.

It follows feedback from major international life companies and a meeting held with  industry representatives on January 12, and follow on from the IA’s initial announcement of its plans to crack down on the industry last November.

The 26-page “Circular No. 12 of 2017 ” says the IA “invites life insurance companies and family Takaful operators and other interested parties” to comment o the latest version of its regulations before 11 May, after which “absolutely no extensions will be granted”, so that it is able to issue the final regulations “without undo delays”.

As reported earlier this year, the changes to the way products currently are being sold are significant. A number of industry executives have said this is why they believe the industry should be given more time to prepare.

Still, Simon Willoughby, head of proposition at Utmost Wealth Solutions, who also chairs the Association of International Life Offices, echoed many in the industry when he said that Utmost’s view on the matter is that any move towards higher regulatory standards and greater cost transparency for customers in any market was to be “applauded”.

“The sensible transitional arrangements announced by the Insurance Authority (IA) recognise the industry feedback provided since the November announcement, and the level of change this will require for both providers and advisers,” said Willoughby.

‘Couldn’t be happier’

Also pleased that the Insurance Authority is moving forward so decisively with its new regulations is Sam Instone, chief executive of  AES International, the ex-pat-focused advisory firm with a major presence in Dubai.

“We couldn’t be happier that the IA have moved forward with all of this without delay,” Instone said.

“Individual qualifications, CPD and registration will raise professional standards. Commission caps and an end to large indemnity commissions will be fantastic for consumers, and it is an excellent step forward for the UAE.”

As far as the likely impact, he said he thought it would result in “dodgy financial salespeople” leaving the UAE, possibly to “pop up somewhere like Kuala Lumpur” next.

Nigel Sillitoe, chief executive of the Dubai-based marketing consultancy, Insight Discovery, also welcomed the Insurance Authority’s announcement and said the new regulations were certain to “be welcomed by both distributors and consumers”.

“Invariably there will be operational issues for the distributors in the short term, especially with the proposed commission caps,” he noted.

“There will also be some players frantically looking to create new products and product codes – different operational structure to each product in each GCC [Gulf Cooperation Council]  market, rather than a generic product across each – to make sure they comply, while others will be conducting full strategic reviews of their licensing going forward.”

Sillitoe noted that the United Arab Emirates was still “an emerging market”, and that, while this made it an exciting market, this needed to be remembered when comparing it “with other, more mature, jurisdictions”.

As reported, Bryan Low, a long-time analyst of the cross-border life insurance industry, issued a stark warning earlier this month about the possibility that a precipitous decline in unit-linked life insurance product sales in two key Asian markets would likely next hit next in the UAE, where “the regulator’s initial proposals suggest a Hong Kong-style scenario that would have a significant impact on advisers’ use of unit-linked linked life products, and therefore, on many advisers’ traditional business models”.

As for the life insurance companies currently active in the UAE market without a local licence, the impact is likely to be “even more profound”, Low added.

ABOUT THE AUTHOR
Gary Robinson
Deputy Editor, International Investment and Head of Video at Open Door Media Publishing. A fully qualified journalist and filmmaker with more than 20 years' financial services experience, both as journalist and originally as an IFA.

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