The Insurance Authority, in a circular published on Tuesday, outlined a series of draft regulations for life insurance and family takaful businesses, and gave industry participants only until 30 November to respond.
The regulator said its research had found that that fees levied by both conventional life insurance companies and family takaful operators in the UAE were perceived as being “unduly high”.
In addition the IA said it was concerned about “poor disclosures in place that do not meet global best practices”.
“The IA has also noticed an alarming amount of complaints from policyholders that they are provided with no value if they surrender in the early years of the policy,” it said.
“Policyholders are being empowered. Fees and commissions are going down. Disclosure is going up,”
Game changer
The insurance regulator’s move has been largely expected among many industry participants in order to bring the UAE more into line with other jurisdictions; like the UK, Singapore and Hong Kong, though most thought it could take at least two years to come to fruition.
According to Nigel Sillitoe, chief executive of research firm Insight Discovery, the new IA circular could be a game changer for the insurance sector and for other players in the UAE’s organised savings industry.
“Policyholders are being empowered. Fees and commissions are going down. Disclosure is going up,” he said in a note to clients.
Catch up move
While noting that he had yet to look at the draft regulations in depth, Sillitoe said the thrust of what the IA was proposing is consistent with general trends in the market for a move away from commissions to more fee-based services and requirements for greater transparency.
At International Advisers’ industry forum in Dubai late last year, several life company executives voiced their views that regulatory change was on the way.
David Kneeshaw, chief executive of RL360°, said he thought commission disclosure was on its way but would take two to five years.
Old Mutual International head of Middle East and Africa, Brendan Dolan said he believed that it could take two or three years to see a greater focus on customer outcome.
Clearly with the IA’s latest move the outlook for change has accelerated.
Indeed regulation is moving at such a fast pace that Jasper Berens, head of UK funds at JPM Asset Management, has predicted that within five years all financial services markets around the world will ban commission and implement an regime like the UK’s RDR.
