United Arab Emirates: United Arab Emirates moves closer to insurance safety net

Last Updated: 27 March 2017
Article by Kennedys

In this article, which is the first of three in a series, Kennedys' Corporate Insurance team looks at the new proposed commission structures under the new draft life regulations in the United Arab Emirates (UAE).

The UAE Insurance Authority (IA) is working towards providing better protection to consumers who want to buy life insurance products, and maturity benefits attached to life insurance products, in the UAE. In order to achieve this protection, the IA published Circular No. (33) of 2016, which sets out the new draft regulations (the "Regulations") for the UAE's life insurance industry.

What was the IA's motivation to draft the Regulations?

After some extensive research, the IA found that high commissions and up-front fees were being charged to consumers on various life products. This is perceived to provide poor policy value to consumers in the early years of the policy. The results of the IA's research also found that there was a large number of complaints from consumers that they are provided with no value if they cancel in the early years of the policy.

Given the results of the IA's research, the IA wants to create a level playing field between life insurance companies in the market and raise the bar of regulation in the UAE. Once finalised, the Regulations will shift life regulation in the UAE into alignment with other developed Western markets such as the United Kingdom1 and Hong Kong2, which have introduced stronger protection for consumers and strict prudential oversight.

What are the key changes to commission structures?

No indemnity commission

Typically, indemnity commission refers to the upfront commission that is paid by an insurance company to an insurance intermediary, for the entire term of the policy in question, based on all future receivable premiums. This type of commission poses significant risk to insurance companies, as the commission amount may be much higher than the premium that the company receives from the consumer in the first few years of the policy. Given the transient nature of the UAE market and the risk that consumers may not continue the policy, this poses a significant challenge to insurance companies' balance sheets and solvency requirements. The Regulations ban indemnity commission altogether. The ban on indemnity commission may also add in a strong element in consumer protection, in that it will mitigate the risk of misselling life insurance products that would otherwise be inappropriate for consumers. On the other hand, the ban on indemnity commission may reduce the sale of life insurance products if distributors become less inclined to take on new commission structures because this may reduce their profits.

Commission caps

In a step that could be revolutionary for the life insurance industry in the UAE, the Regulations specify limits on "Total Commissions" that can be paid out to the distribution channels. The Regulations provide a very wide definition of Total Commissions, which includes all amounts paid to sales representatives as compensation related to selling and/or maintaining life insurance products. Commissions can be paid in a variety of ways (e.g. a percentage of the premium, fixed amounts, bonuses, incentives etc), but irrespective of what they are called and how they are paid, these payments must be combined and counted as part of the Total Commissions. The proposed limits on Total Commissions are as follows:

  1. Savings products (i.e. any insurance product that has a maturity benefit attached to it):

    1. For regular premium policies, the overall cap on commission has been fixed at 90% of the annual premium. The maximum commission is limited to 4.5% of the periodic premium throughout the life of the policy. Irrespective of the premium frequency, the commission should be deducted as a monthly charge from the policyholder's account over a period of not less than 5 years;
    2. For single premium policies, the maximum commission paid must not be more than 4.5%. The commission paid should be deducted, as a monthly charge, over a period of at least 12 months. It is not clear from the Regulations whether the monthly charge is to be deducted from the policyholder's account.
  2. Term products i.e. any insurance product that does not have a maturity benefit attached to it:

    1. For regular premium policies, the overall cap on the commission has been fixed at 160% of the annual premium. The maximum commission is limited to 10% of the periodic premium throughout the life of the policy. Irrespective of the premium frequency, the commission should be deducted as a monthly charge from the policyholder's account over a period of not less than 5 years;
    2. For single premium policies, the maximum commission must not be more than 10%. The commission paid should be deducted, as a monthly charge, over a period of at least 12 months. It is not clear from the Regulations whether the monthly charge is to be deducted from the policyholder's account.

Looking Forward

The overall cap on commission is a positive step towards providing better consumer value and protection. However, requiring all premiums to be paid monthly, instead of one lump sum payment at the beginning of the policy period, may lead to stagnation of the market where newcomers to the market are locked out, or smaller providers end up leaving the market due to their inability to cover the initial costs of offering new policies. Further clarity needs to be provided as to how the new commission structure will work in practice.

The Regulations remain in draft and in a consultation process with the IA. If the Regulations are not implemented, consumers will continue to have lack of protection and standards will be deficient with possible misspelling, as there are no equivalent rules around market conduct and "treating customers fairly" as in the UK and European markets. Further, while the Regulations introduce restrictions on capped commissions, which provides consumer protection, there is still a situation in which market conduct regulation needs to be addressed immediately as the distribution and selling of life insurance products by insurance intermediaries is overseen by different regulators with different sets of rules and regulations. For example, the IA regulates insurance brokers and the UAE Central Bank and the Securities and Commodities Authority regulates independent financial advisers.

Overall, the Regulations represent a positive move to regulate the way in which life insurance products are sold and marketed in the UAE, which will provide a safety net for consumers. Life insurance companies should start thinking about addressing their terms of business agreements with their appointed insurance intermediaries, in order to structure commission payments in compliance with the Regulations. Insurance intermediaries should consider a financial audit of their income and cash flow in order to assess any risk associated with reduced commissions and the potential loss of future indemnity commissions.


1. Consumer Insurance (Disclosure and Representations) Act 2012.

2. http://www.oci.gov.hk/download/sp_20131018.pdf

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions