In the coming year the United Arab Emirates (UAE) Insurance Authority will issue new rules. Restrictions on indemnity commission and caps on the overall fees and commissions charged to customers, coupled with significant increases to the operating costs of intermediaries, will result in a dramatic decline in the number of advisors in the market.
The need to implement new systems to ensure compliance with enhanced client disclosure, training for staff and a requirement to register each person involved in the sale and distribution of life products will likely have a disproportionate impact on smaller intermediary firms. This may lead to increased M&A activity resulting in the long-awaited consolidation in the insurance broking community.
For insurers, the new regulations will require new products to be developed or amendments made to existing products to reflect the caps on fees and charges. Carriers will also have to make changes to their systems to ensure that the disclosure requirements are satisfied, particularly the ongoing requirements to disclose details of the 'top 5 funds' available for investment through the products. Insurers will also need to develop education and training for distributors and consider how 'orphan' customers – those customers whose advisors exit the market – will be dealt with.
Declining distribution capacity will be a concern for insurers and may result in the rise of direct distribution or potentially increased use of agency models in the UAE.
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