Peter Hodgins, an insurance lawyer at Clyde & Co in the UAE, explains the significance of the changes introduced by the UAE Insurance Authority in 2017.
What is notable about the UAE Insurance Authority's initiatives in 2017 ?
We are seeing a theme of tightening up the regulations on the people dealing with consumers - so the people giving advice and acting on the behalf of the consumer in relation to both insurance and financial products. The proposed life regulations, have not yet hit the statute book but a key feature of those is looking at how life insurance products are intermediated in this country and again the qualifications of the persons giving advice and acting as intermediaries in respect of those products.
Will we see an end to commission?
The key challenge for insurance brokers is how they pay their staff. We have commission junkies who are used to being able to earn an incredible amount of money out of indemnity commissions and now they will have to be weaned off that and will probably be paid more of a base salary.
Is that sustainable?
The larger institutions are more capable of withstanding this because they actually have the revenue available to smooth over this period until the commission – which will be paid over a longer period – starts to flow in and they can deal with the bumps in the road.
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What about the insurance providers - will they develop more suitable savings and investment products?
They fundamentally have to change their products and the pricing structures within them. To a degree, what we are seeing here in the UAE is a reflection of what is going on elsewhere in the world. We have seen moves in this direction in the UK, Hong Kong, Singapore and Poland. Bearing in mind that the majority of the life insurers are international, they are likely to take products they have elsewhere and tweak them to comply with the regulations. That’s why there needs to be an implementation period here because you can’t just whip out a new product overnight.
What other challenges will the insurers face?
They then have to rework all of your systems so that all of this actually works and then there is training; the company is going to have to train the intermediary community to be able to advise customers properly on how these products work – all of which is going to take time.
Why were the car insurance changes significant?
The changes might have pushed up costs slightly but my general sense is that it was not actually a bad idea as it has extended coverage. Another thing the IA brought out a couple of months ago was related to how insurance brokers sell motor insurance in car showrooms – basically saying they have to obtain permission from the IA to have a kiosk in a car dealership and have to have someone appropriately qualified manning that kiosk. It’s back to the overall theme of wanting to know that the person dealing with the consumer is appropriately qualified and capable of giving advice properly.
