New rules for life insurance and family takaful that came into effect on 16 October are seen as unfavourable to insurance brokers and agents, according to industry executives.
In particular, one regulation stipulates that first-year commissions must be capped at 50% of the annualised premium or 50% of the total commissions payable under the insurance policy, whichever is lower. The remaining commission amount is to be paid out over the remaining premium payment term of the policy. Previously, commissions were paid upfront, reported Al Roeya.
Customers are to be given a detailed schedule of fees and commissions for the entire duration of a policy. Customers have the option to cancel a new policy within 30 days.
Mr George Kabban, CEO of United Insurance Brokers (DIFC) told Al Roeya that the previous system contained many challenges, especially in terms of the rights of clients. He pointed out that the insurance commission ranged between 70% and 90% of the first-year premium. When the client wanted to cancel the policy and recover his money, he would be informed by the insurance company that the premium had been used on fees and commissions.
He added, "In general, the new decision carries some positives in favour of customers, but it carries disadvantages for middlemen or sellers."
Mr Saeed Al Mehairi, CEO of United Gulf Insurance Brokers, stated that life insurance commissions were very attractive to intermediaries especially as they were collected in full during the first year of the policy, but with the new regulations, the situation becomes worrying for many advisers and it will push many of them to turn to other sectors to compensate for the decline in commissions.
"We cannot deny the advantages of this decision for clients, but intermediaries are definitely not happy with it," he added.