Q&A Insurance Law part 1
The Federal Decree-Law No. (48) of 2023 concerning the regulation of insurance operations in the United Arab Emirates governs insurance matters and defines the legal framework for insurance in the country. The Central Bank of the United Arab Emirates is responsible for supervising and regulating the insurance sector, as per Federal Decree-Law No. (25) of 2020, which assigned the Central Bank and its board of directors the duties previously held by the Insurance Authority established by Federal Law No. (6) of 2007.
But what is insurance?
Insurance is a contract under which the insurer (insurance company) is obligated to pay the insured or the beneficiary, for whom the insurance was stipulated, a sum of money, an annuity, or another form of financial compensation upon the occurrence of an event or realization of a risk specified in the contract, in return for premiums or other financial payments made by the insured to the insurer.
Then who are the parties to the insurance contract?
The insurance contract is between several parties:
- The insurer: An insurance company established in the country or a foreign insurance company licensed to conduct insurance business in the country either through a branch or an insurance agent. It is prohibited for any unlicensed company to issue an insurance policy, and any insurance policy issued by an unlicensed company is void. Any party who receives such a policy may seek compensation.
- The insured: The person who has entered into the insurance policy with the insurance company, which may be issued for his/her benefit or for the benefit of the insured (the beneficiary).
- The insured (beneficiary): The person who has acquired rights from the insurance policy either initially or those rights have been legally transferred to him/her.
An insurance policy is the contract concluded between the insurer (insurance company) and the insured, specifying the terms of insurance, the rights and obligations of the parties to the contract, or the rights of the beneficiary. Appendices attached to the policy become part of it. The insurance policy must be written in Arabic in the country, although it can be accompanied by a translation in another language. It should be noted that some insurance policies may be exempted from the requirement to be written in Arabic provided that an Arabic version is submitted if requested by the Central Bank.
One of the main obligations of the insured is to pay the premium, which is the financial consideration paid or due to be paid by the insured under the insurance policy.
What are the types of insurance contracts?
There are various types of insurance contracts to meet the diverse needs of individuals and companies. This includes:
- Life insurance – which covers the death of the insured person and provides compensation to the beneficiaries specified in the contract.
- Health insurance – which allows individuals and families access to healthcare and covers medical treatment costs.
- Vehicle insurance – which includes third-party liability insurance covering the insurer's obligations towards the third party in the event of an accident caused by the insured or comprehensive vehicle insurance providing full coverage for damages to the insured's car or the third party's car in case of an accident.
- Important types of insurance also include marine and aviation insurance, travel risk insurance, property insurance against loss and damage due to certain incidents, fire insurance, professional liability insurance, directors' and officers' liability insurance, along with various other types of insurance.
The insurance company pays the specified compensation in the insurance policy to the insured or the beneficiary according to the contract as soon as the incident occurs or the risk insured against is realized. In such cases, the insurance company replaces the insured in claims against the party that caused the damage covered by the insurance company's liability. For example, if Mr. Adam insured with an insurance company and then suffered damage from a third party (which is covered by the insurance policy), the insurance company will compensates him for the damage, and thus the insurance company takes the place of Mr. Adam in claiming the amount paid to him from the party that caused the damage.
But what if there is a dispute arising from the insurance policy between the concerned party and the insurance company?
In cases of any dispute between the concerned party and the insurance company, the concerned party should contact the insurance company to explain the issue and provide supporting documents. Article (101) of Federal Decree-Law No. (48) of 2023 concerning the regulation of insurance operations states that the insurance company must process insurance claims according to the provisions of the insurance policies and applicable legislation, and thereafter issuing a decision on any claim by either accepting or rejecting it. If an insurance claim is rejected, either wholly or partially, the company must provide written reasons for its decision.
But what if the concerned party does not accept the insurance company's decision?
In such circumstances, the concerned party should file a complaint with the Banking and Insurance Dispute Settlement Unit at the Central Bank (SANADAK) via its website. The complaint is recorded in the register according to the date it was received. The organizational unit refers the complaint file to the competent committee within three working days after completing the documents, informing the complainant of the referral, including the complaint number, referral date, and the committee responsible for reviewing the complaint.
What is the Banking and Insurance Dispute Settlement Unit (SANADAK), and what are its competencies?
The Banking and Insurance Dispute Settlement Unit (SANADAK) is an independent entity whose role is to resolve insurance disputes arising from complaints by insured individuals, beneficiaries, or affected parties with legitimate interest in the insurance dispute against the insurance company, regardless of the amount in question.
The committee consists of two judges, and one or more experts chosen by the Central Bank.
The committee has the right to review documents, records, and files, receive statements and clarifications, listen to witnesses and experts, conduct interrogations (if necessary) and taking any appropriate measures without being bound by the Civil Procedures Law and the Federal Advocacy Law. The committee holds sessions attended by the chairman and the majority of members to consider the disputes presented, having the right to hear the parties and their defenses, and thereafter issuing decisions by majority vote.
If a settlement is reached between the parties before the committee, it is documented in a reconciliation deed signed by the chairman and committee members.
What if the committee does not reach an amicable settlement of the insurance dispute?
If the committee does not reach an amicable settlement, it shall proceeds with resolving the dispute and issuing a final decision. The concerned party can appeal the committee's decisions to the Court of Appeal within (30) days from the date of the decision or notification, otherwise the appeal is inadmissible.
However, the insurance company cannot appeal the committee's decisions in disputes not exceeding AED 50,000, and these decisions are final and enforceable upon issuance.
Nevertheless, for disputes exceeding AED 50,000, the insurance company may appeal the committee's decision to the Court of Appeal within (30) days from the decision or notification date, otherwise the appeal is inadmissible.
The committee's final decisions are enforceable.
It should be noted that any appeal suspends the decision's enforcement in disputes exceeding AED 50,000.
In all cases, lawsuits arising from insurance contracts and services cannot be accepted if these disputes are not presented to the committees. This is often a crucial point which is missed, leading to dismissal of many lawsuits for not following this procedure outlined by the law.
If an appeal is filed against the committee's decision, the appeal transfers the case to the position it was in before the appealed decision, only in respect of the appealed aspect. New claims in the appeal are not accepted, and the court must reject them on its own initiative. However, the original claim can include additional entitlements due after the final requests before the committee, including additional compensation claims arising after these requests. Changing the reason for a claim or adding to the original claim is permitted as long as the subject remains unchanged.
However, it should be noted that new parties cannot be included in the appeal unless they seek to join one of the parties, or if the judgment or decision under appeal is deemed to be binding on them.
Lastly, further procedures are followed in accordance with the Federal Civil Procedures Law concerning appeal and cassation or revocation, as appropriate.
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.