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The UAE’s New Life Assurance Regulations – One Month Until Implementation

2 March 2020

Next month, the Insurance Authority Board of Directors’ Decision No. (49) of 2019 Concerning Instructions for Life Insurance and Family Takaful Insurance (the Life Regulations) will come into legal effect. The Life Regulations have the potential to dramatically alter the way in which life assurance products are sold in the UAE.

The purpose of this Briefing is to highlight the key features of the Life Regulations which Insurers/Distribution Channels should be aware of. Distribution Channels have been defined broadly to include the following:

  • Insurance Agents;
  • Insurance Brokers;
  • Banks or finance companies involved in the marketing of insurance policies;
  • Employees of Insurers, involved in direct production.

Commission Limits

The main driver behind the Life Regulations is the aim of consumer protection.

In the past few years, the Insurance Authority have received numerous complaints relating to savings, investment and life assurance products. Typically, these complaints involved heavy up front commission payments payable to Distribution Channels, accompanied by unreasonably high break costs for the policyholder on termination.

In order to prevent this practice, the Life Regulations have introduced commission limits. From 15 April 2020, the level of permitted commissions payable to a Distribution Channel will be capped. The level of the cap will be dependent on the type of product sold; a higher level of commission is permitted on pure protection products, whereas policies which incorporate a savings/investment element will be subject to stricter commission caps.

Further, the maximum commission payable in the first year of a policy will be limited to 50% of the annual premium or total permitted commissions (whichever is lower). First year commissions are also subject to a five year commission clawback.

Free Look

Another notable feature of the Life Regulations is the inclusion of a “free look” period when purchasing applicable policies. This essentially affords the policyholder a 30 day cooling-off period, during which they can choose to cancel the policy and receive a refund for any premium paid. The “free look” period is deemed to commence from the earliest of (i) the date of policy issuance, (ii) the date cover commences or (iii) the date when the policy documents are signed.

From a budgeting/administrative standpoint, the inclusion of a statutory “free look” period is likely to prove burdensome for Insurers. At the same time, it will undoubtedly serve to provide an additional layer of protection for policyholders.


In furtherance of the objective of consumer protection, Insurers/Distribution Channels are now obliged to provide certain minimum detail to the policyholder, including information on premium, charges/expenses, relevant benefits etc. This is to ensure that, to the greatest extent possible, the policyholder understands the nature of the product they have purchased.

With regards to break costs, the Life Regulations oblige Insurers/Distribution Channels to set out, at the point of sale, the surrender charges and surrender value of the policy for each applicable year. Further, these charges must be provided in red and in a separate document to the Policy, which must be countersigned by the policyholder.

Finally, both the policyholder and the Distribution Channel must sign a declaration confirming that the policyholder has been provided with the relevant illustrations.

Further Extension Unlikely

The Regulations are the result of a two year consultation process and the final draft has incorporated a number of comments from stakeholders.

Notwithstanding that the Insurance Authority has received a number of extension requests, it is unlikely that the deadline for implementation of the Regulations will be extended further. Therefore, Insurers should be proactive in taking measures to ensure their systems are ready for implementation on 15 April 2020.

If you would like to discuss any of the above points in further detail, please do not hesitate to contact the author of this briefing or your usual HFW contact.

Salma Achour Khouaja
Senior Associate, Dubai
T +971 4 423 0559

Shane Gibbons
Associate, Dubai
T +971 4 423 0574