News Middle East30 Sep 2020

UAE:Advisers expected to quit insurance market on implementation of new regulations

30 Sep 2020

New life insurance regulations that will come into force on 16 October 2020 are expected to thin the ranks of financial advisers.

Industry watchers have warned that the rules may lead to shortage of distribution channel support, according to a report by International Adviser.

Many firms have already taken action by changing their structure and turning online to cut costs and stay afloat.

“This could also mean increases in direct sales and opportunity for players with the long-term vision to enter the market,” said Anand Singh, senior associate in the insurance and reinsurance practice at law firm BSA Ahmad Bin Hezeem & Associates.

Decision BOD49

The new regulations, in the form of Insurance Authority Decision No. 49/2019 on the Life Insurance Regulations issued by the UAE Insurance Authority, has had an especially long gestation period. The first draft was issued in November 2016 and after multiple rounds of revisions and delays the regulations are finally coming into effect on 16 October 2020.

The regulations address the most important issues relating to mis-selling, overall commission payouts, upfront payments to agents/brokers by insurers, fees and charges associated with investment products, the free-look period and mandatory benefit illustrations.

The regulator has set a cap on commissions for lump sum investments and fixed-term contractual plans and issued guidelines on selling insurance and investment products to safeguard the interest of customers.

The measures include a cap of 4.5% on the sale of lump sum portfolio bonds or offshore bonds by advisers from financial companies. This is in place of a commission up to 10% paid by some insurers to advisers on the sale of their products.

The new rules say that no indemnity commission — a sum paid upfront to advisers on the full value of an insurance policy — is allowed for regular premium policies and the commissions paid should be based on the annualised premium collected.

First year commissions must be capped at 50% of the annualised premium or 50% of the total commissions payable under the product, whichever is lower.

The remaining commissions must be paid out linearly over the remaining premium payment term of the policy.

The first year commission is subject to commission claw-back during the first five years of the policy, at a minimum.

If the fees are fully disclosed separately from all other charges and the customer is fully aware of the fees and services at policy inception, then the fees are not part of total commissions.


Advisers are required to come clean as they should provide customers with a detailed schedule of fees and commissions for the entirety of a policy’s life cycle and customers have the option to cancel a policy within 30 days.

The regulations stipulate that the fees paid to an investment adviser for providing investment related advice will be considered part of the total commission if the fees are not fully disclosed separately from all other charges or if the customer is not fully aware of the fees and services at policy inception.


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