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• Following the issuance of draft regulations on insurance producers (a new category of insurance intermediary recognised by the Authority), they have been included within the provisions of the draft i.e. payment to insurance producers is included within the overall cap on commission for intermediaries on a product; • The commission cap for pure protection policies has been retained as those proposed in the earlier draft at 10% of the annual premium for each year over the term of policy, subject to a cap of 160% of the annualised premium, which for single premium policies must be limited to 10% of the premium; • To calculate the maximum commission payable under savings product (i.e. a combination of insurance and savings component) a formula has been prescribed which takes into account the savings component vs the protection component, compliance of which is a responsibility of the pricing actuary of the Insurer. The current draft provides further clarity on how premium for riders, add-on coverage etc which are added subsequently are to be considered for the purpose of calculating the maximum commission caps; • Further, the draft emphasises that the total commission caps apply to all insurance producers in aggregate, i.e. if there is more than one Insurance producer involved or if the producer changes during the period of policy, then the total commission caps specified shall apply as if there was only one insurance producer; • In case of cancellation during the free look period, the insurance producers must return all commission back in full and if the cancellation is during the remainder part of the year, pro rated first year commission must be refunded back to the Insurer.
Indemnity Commission Indemnity commissions or advance commission on sales to intermediaries to be based on annualised premium only and if the mode of premium payment is such that the premium is not paid upfront, then such indemnity commission must not be financed from policyholder account. For this purpose, the first year commission has been capped at 50% of the annual premium or 50% of the total commission payable under the product, whichever is less, with the remaining commission paid out uniformly over the remaining premium paying term when such term is less than 20 years. The current draft proposes that if the premium payment term is over 20 years, the pricing actuary of the Insurer may propose a pay-out plan. Such plan should be proposed at the time of obtaining prior approval on the product.• The insurer and also the intermediary must not ask for confidential details such as passport, bank account, visa etc to produce the illustrations; • The sale will be complete only once the customer has signed (physically or electronically) all the relevant documents and a copy is shared with customer; • Free look period has been retained at 30 days, which commences on the the later date of policy issuance, date of commencement of coverage or the date when policy documents are signed; • Only the insurance company has the right to contact the customer to determine the reason for cancellation of the policy, not the intermediary; • All existing policyholders must be sent revised illustration tables either when requested or in the case of certain trigger events specified in the draft; • When the policy is sold, the surrender charges and surrender value at the end of each policy year must be provided in a separate document from the overall pack, and should be in red colour, requesting the client to sign it separately; • There are a number of other disclosure requirements that have been specified, with respect to the charges, passing of rebates back to customer and other relevant matters, which must be looked into in detail by the Insurers.
Insurance Producers and Investment Advisors Insurance producers have been introduced as a new line of insurance intermediary under this draft of the regulation. The license of an insurance producer is limited to individuals (and not entities!) who fulfil the criteria prescribed under the regulations. However, to be able to sell investment products, such a person must be licensed and registered as an “Investment Advisor”. The licensing of an investment advisor falls within the purview of the Emirates Securities and Commodities Authority (ESCA). The Life Regulations go on to state that an investment advisor cannot sell a life insurance product unless they have obtained an “Insurance Producer” license from the Authority. Further, the commission caps prescribed in the Life Regulations apply to investment advisors as well.In this article, we explore some of the opportunities that...
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