NEWRULES A KEY TEST FOR UAE INSURANCE BROKERS

COMMISSION PAYMENT STRUCTURE TO IMPACT REVENUE

Insurance brokers in the UAE will take a deep hit on their revenues with a new commission payment structure coming into effect on all insurance policies from October 15. They are now asking the country’s insurance industry regulator for a review of the new payment regime, which brokers saywill evenaffect theirbusiness continuity.

“We keep looking at our bank statements from the last two to three days … and the changes in commission payouts is stark,” said a broker. “If they were used to getting Dh100 earlier, now that’s come down to Dh7.5.”

What are these changes?

In simple terms, itmeans fees/ commissions generated from selling a life or savings policywill bepaidto thebroker over the tenor of the premiumpayment. And not as a one- off payment made at the time of the policy coming into effect and the first premium is paid by the policyholder.

For brokers and agencies long used to getting paid upfront, the drop in income can be quite substantial. It’s not the only issue brokers are confrontedwith.

“As per the newregime, if for some reason the policyholder does not meet any premium payment commitments after the first year, the broker gets saddled with paying back the commission generated up to that point on the policy,” said Leena Parwani, CEO of LPH Insurance Brokers. “In a marketplace where residency permits are for two or three years on average, this requirement places an additional burden on agents.”

The UAE Insurance Authority first proposed an overhaul of the life insurance sector in 2016. Despite several initiatives, the life insurance category in the UAE never managed a sustained high growth trajectory.

What was also hurting its prospects were the high incidence of mis- selling of fixedterm savings products. “They typically combine a life insurance policy with an investment plan and came under fire for being expensive and inflexible, as clients are locked in for a set period and must pay the full charges associated with the product if they exit early,” said Leena Parwani.

For the UAE Insurance Authority, the need to bring in the new requirements was clear cut — ensure greater transparency in policy selling, especially those related to life and term savings. Plus, it would reduce the opportunities of customers getting caught in “mis- selling” practices.