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The formal declaration of the outbreak of Coronavirus as a pandemic (Covid-19) on 11 March 2020 sent shockwaves around the world and the insurance industry has been hit hard. While the market was already struggling with hardening rates and lack of capacity, Covid-19 added fuel to the fire and saw several reinsurers pulling out of the region, until things settle down.
The economic fallout following Covid-19 radically shifted consumer needs, habits, and expectations, while also forcing the insurers to transform their operations overnight to ensure that business kept going on even if the employees did not have physical access to the office and support infrastructure. As trading and businesses came to a halt, there was an unprecedented downturn in the demand for insurance. The mandatory insurances, health and motor however were the only saving grace, as claims under these policies dropped substantially. The United Arab Emirates (UAE) Insurance Authority (IA) worked through the pandemic to announce several regulatory changes, of special mention being the relief for policyholders and especially frontline health workers, in line with the UAE government policy for frontline workers.
As with every year, we provide below a chronological list of the important regulations and guidance that were issued by the IA in 2020 along with a brief impact analysis for each regulation:
March 2020 – Insurance Authority Board of Directors’ Resolution No. (9) of 2020 on the Amendment of Some provisions of the Insurance Authority Board of Directors’ Resolution No. (33) of 2019 Concerning the Regulation of the Committees for the Settlement and Resolution of Insurance Disputes – Amending the category of claims that fall within the jurisdiction of the Dispute Resolution Committees of the Insurance Authority (DR Committee) and amending the definition of the term “Beneficiary” which now includes only original beneficiaries named in the insurance policy. This amendment effectively excludes from the jurisdiction of the DR Committees, any claims from assignees against insurers. Further, the following actions are excluded from the jurisdiction of the DR Committees:
March 2020 – Insurance Authority Board of Directors’ Resolution No. (14) of 2020 On the Amendment of Some Provisions of the Insurance Authority Board of Directors’ Resolution No. (15) of 2013 Concerning Insurance Brokerage Regulations – Introduced as a COVID 19 relief measure by the IA for insurance brokers operating in the UAE, whereby insurance brokers were permitted a reduction in their regulatory capital requirements, representing a reduction of AED 1,000,000 from their regulatory capital subject to them fulfilling and satisfying the IA requirements as provided in the Resolution.
April 2020 – Resolution No. (17) of 2020, which amended provisions of Resolution No. (30) of 2016 of the Board of Directors – Another Covid-19 relief measure, aimed at policyholders, this Resolution allowed insurance companies to grant vehicle owners with low records of accidents, a discount of upto fifty percent (50%) on the minimum insurance premium upon renewal or the issuance of new policies, for workers in the medical sector, the army, the police, and the civil defense; and for people of determination, the elderly or those over 60 years old, as well as any insurance applicant with a traffic record clear of any accidents.
April 2020 – Insurance Authority Board of Directors Decision No. (18) of 2020 concerning the Electronic Insurance Regulations – One of the most important laws issued by the in 2020 by IA, the Electronic Insurance Regulations is a step in the right direction by the IA, when the whole world is moving into digital. Under the regulations, licensed insurance companies and related insurance professionals must obtain pre-approval from the IA to carry out any electronic or online insurance operations. Insurers and insurance related professionals are required to develop and maintain an “electronic insurance operations plan” which must be approved by their respective Boards and submitted to the IA for approval. This decision recognizes the Price Comparison Websites as standalone entities and mandates that only an insurance broker can deal with a price comparison website. The Regulations that became effective from 14 November 2020 also require the Price Comparison Websites to be registered with the IA and a copy of the agreement signed between the Insurance Broker and the Price Comparison Websites to be shared with the IA.
October 2020 – Merger of Insurance Authority and Central Bank of UAE – His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of UAE and Ruler of Dubai announced on Twitter that the UAE Insurance Authority will be merged with the UAE Central Bank. The decision also transfers all operational and executive powers of the Securities and Commodities Authority (SCA) to the local stock markets, while the SCA maintains regulation and oversight of the local financial markets.
October 2020 – Implementation of the Life Insurance Regulation – The Implementation of the Life Insurance Regulation which was issued in October 2019 was due in April 2020 but following the Covid-19 pandemic, the IA postponed the implementation for six months. These Regulations however became live on 16 October 2020 following the end of the 6-month extension provided by IA. The Life Regulations are revolutionary to a large extent, as the main changes proposed such as the caps on commission are radical for the market and not all the changes have been welcomed warmly by the industry. We expect to see major overhaul in the insurance distribution model for life insurance as an outcome of the Life Regulations.
November 2020 – Insurance Authority Board of Directors’ Decision No. 23/2019 Concerning Instructions Organizing Reinsurance Operations – Insurance Authority had issued the Reinsurance Regulations in May 2019 and directed that all the insurance and reinsurance companies operating in the UAE comply with the provisions of this Regulation, and relevant entities were provided 18 months to implement the requirements. Accordingly, from November 2020 onwards all re/insurers are required to be compliant with the Reinsurance Regulations failing which administrative fines or warnings could be expected from the IA.
December 2020 – Insurance Authority Board of Director’s Decision No. 25 of 2020 regarding grievance procedure against fines imposed by Authority – The Decision states that any party aggrieved by the decision of the IA in respect of the administrative fine imposed, would be entitled to file a grievance before the Board of Directors of the Authority containing detailed reasoning, grounds and documents justifying its grievance within 15 days from the date of being notified of the fine.
December 2020 – Insurance Authority Board of Directors’ Resolution No. (26) of 2020 on the Amendment of Certain Provisions of the Insurance Authority Board of Directors’ Resolution No (25) of 2016 Concerning the Issuance of the Unified Motor Insurance Policy – The Decision introduces some new requirements which may have some impact on the underwriting of motor policies in the future, such as the requirement to declare a vehicle total loss if the chassis, pillars or other durable parts are damaged and require cutting, welding etc. With respect to the substitute vehicle in case of an accident, the Decision provides that the substitute vehicle must now be provided for a period of up to 15 days (which was previously 10 days) and that the insurer must provide an alternate vehicle of similar per diem rate. Further, insureds have the option of requesting for agency repair even after the first three years and the insurers must provide a rate based on the set tariffs.
December 2020 – Insurance Authority Board of Directors Decision No. (27) of 2020 regarding regulations for licensing insurance producers – Insurance Producers have been operating in the market for several years, albeit under the umbrella of brokers or through some alternate arrangements and the Producers Regulations aims at regulating this profession. The Producers Regulations sets out the licensing requirements for Insurance Producers, including details of the roles and responsibilities. The Insurance Producers are not permitted to work in the interest of Insurance Brokers or Agents, or such other insurance professional nor is permitted to sub-contract its responsibility to another company. The Insurance Companies will be permitted only to engage the services of licensed insurance producers for solicitation and procurement of insurance business.
While Covid-19 disrupted life and business in a big way throughout 2020, it did bring about innovation in the market and confidence that new and alternative ways of doing business can be successful as well, if implemented properly. 2021 is bound to see more disruption in the insurance market from the young InsurTechs, who are innovating the entire life cycle of insurance, from product designing/underwriting, distribution up to the claims management. There has been an increased awareness about the need for insurance, be it personal lines or be it commercial, such as business interruption, cyber liability etc., which has kept the insurance market buoyant. In 2021 it will be interesting to also see how “Business Interruption” cover will evolve following the UK Supreme Court ruling on 15 January 2021 in favor of the United Kingdom’s financial conduct regulator, the Financial Conduct Authority (FCA) in respect of the Business Interruption Test Case, especially because the London Market wordings are frequently used in the Middle East, including the UAE.
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