The Central Bank of the UAE has announced new regulations affecting insurance brokers, set to take effect on February 15, 2025.
The legislation aims to streamline the operational landscape for insurance intermediaries while enforcing stricter compliance measures.
Under the new framework, insurance brokers in the UAE are prohibited from combining their roles with any other insurance-related professions or becoming partners or agents of other brokers. This move aims to ensure that brokers maintain a focused and impartial role in the insurance process. Furthermore, the regulations prevent insurance companies from communicating directly or indirectly with policyholders who are clients of these brokers during both the inception and renewal of policies, ensuring that brokers receive their rightful remuneration.
Remuneration Guidelines
The law mandates that insurance firms must adhere to strict deadlines regarding broker payments. Specifically, brokers are entitled to receive their agreed remuneration within ten business days from the date insurance companies receive premium payments. For policies paid in installments, brokers must receive their payments in alignment with the same timeline.
Legal firm HFW, which has detailed the regulations, emphasizes that the rules apply broadly to onshore UAE regulated entities, including all insurance brokers and companies, as well as foreign branches licensed for primary insurance and reinsurance, including Takaful. However, brokers licensed in financial free zones for reinsurance businesses are exempt, as they will remain governed by their respective regulatory frameworks.
Prohibitions and Best Practices
The regulations also impose a series of prohibitions on insurance brokerages and their staff. These include:
- Not engaging in any insurance-related professions beyond broking operations.
- Not assigning broking operations to other brokers without written consent from both the client and the insurance company.
- Not allowing non-Central Bank regulated individuals or entities to use the employees or agents of licensed entities to solicit insurance policies.
- Not sharing remuneration with other insurance professionals or offering discounts to clients out of the remuneration received from insurance companies.
To uphold best practices, brokers are required to assist clients with claims procedures, request any missing documentation within two business days of receiving a claim application, and inform clients of policy expirations in writing at least 20 days in advance. Additionally, brokers must communicate using official email channels.
Restrictions on Claims Settlements and Discounts
Notably, insurance brokers will be prohibited from collecting claims settlements, which must be paid directly to policyholders by the insurance companies. This rule applies only to primary insurance operations, as reinsurance is subject to its own brokerage agreements.
Importantly, brokers are expressly forbidden from offering discounts to clients from the remuneration they receive. Any discounts must originate directly from the insurance company, ensuring transparency and preventing potential market manipulation.
In line with these new regulations, brokers are required to maintain Insurance Brokerage Agreements with at least two insurance companies, specifying the duration, termination provisions, types of business, geographical areas, and remuneration structures. These agreements must clarify that brokers are not responsible for any unpaid premiums by clients and restrict them from issuing or amending insurance policies, except in specific cases like motor certificates.
News Source: Khaleej Times
