On the 16th October 2020, the UAE Insurance Authority brought in its much-discussed BOD-49 life insurance regulations. Whilst these were supposed to come into force earlier, the implementation of the new regulations was delayed by the pandemic. The BOD-49 regulations are intended to combat mis-selling and increase transparency and value for consumers.
What Is The BOD-49 Regulation?
In short, the BOD-49 regulation means that all fees must be explicitly shown to the customer. It also means that customers are allowed to change their minds within the first 30 days of purchasing a policy and receive their money back. Additionally, insurers now must make sure that consumers understand important parts of the insurance product they are buying. These customers must then re-confirm that the product is the right one for them.
Commissions for insurance brokers and advisors have also been capped in an effort to maximise value for consumers.
Implications of BOD-49 for the Insurance Industry?
For insurance brokers in the UAE, the BOD-49 regulations will have a huge effect on their business with smaller brokers anticipated to exit the insurance market and a notable change to the existing commission structure.
Because of this, some insurance brokers are not pleased with the new regulation. Amongst their concerns is the sustainability of the regulations as it’s feared that insurance providers will not be motivated to sell these products. This would ultimately hurt consumers as there would be a reduction in the number of products available. Products will also become more expensive for policyholders.
However, there is also optimism. Many believe that what the new regulations will do is draw into sharp relief the good and bad advisers in the market. The regulations, on this appraisal of the situation, could benefit both consumers and those advisers willing to change, adapt and provide quality products to their customers. On the contrary, those brokers looking to maximise commissions from short-term products will now struggle to survive.
What Does IAE Think About BOD-49?
‘The fact of the matter is that life insurance does not perform well in the UAE’ says Ian Featherstone, CEO of IAE Insure. ‘It has a penetration rate of only 0.7%. This is compared to a rate of 9.6% in the UK. With the BOD-49 regulation aiming to increase transparency and value for consumers, it’s hoped that many will now feel more comfortable about purchasing a life insurance policy. Further, whilst there may be a reduction in the amount advisors are earning from commission, it is hoped that the increase in consumers buying insurance will make up for this reduction.’
The upshot is this: insurers and insurance brokers need to change. With a focus on the long-term benefits of the new regulations, brokers will be able to provide more sustainable products with a view to serving clients for longer periods and this will improve both the sustainability of their business practices and the perceptions of consumers.
Concluding, Ian Featherstone says ‘We’re seeing some insurers embracing the new regulations and designing products specifically in line with the goals of BOD-49, namely increasing transparency and value for customers. This is set to continue as many realise that their only two options are to change or fade away.’
If you’re concerned about whether you have enough cover or want to discuss what policy is right for you, contact IAE Insure today at firstname.lastname@example.org or call +971 4 396 1878 for a FREE no obligation quote. Visit us at www.iaeinsure.ae.