How the New UAE Regulations Impact Your Life Insurance Policy

If you own a life insurance policy or if you’ve been on the market for one lately, then you’ve probably heard of the ‘new regulations.’ 

I’ve come across many questions around these new regulations, the most persistent being: ‘What does this mean for my Life Insurance policy?’ 

So, here’s as complete an answer to that question as possible, without drowning you in Insurance parlance.  

These new regulations are called BOD49, and here’s what they mean for you as a client:

• Your Advisor now has to ensure they specify all fees to you explicitly – no more half-understood plans or gray areas
• You now have a 30-day free-look period. If you’re unhappy with your policy or the service you receive in the first 30 days, you can cancel and walk away 
• It is now mandatory that you verify that you have understood the policy features 

The regulations are essentially designed to bring more transparency to the transaction and help you make a better decision when purchasing Life Insurance. 

Now, there’s a whole other side to this coin: the impact of the regulations on your Life Insurance Provider or Advisor. 

The other significant change that BOD-49 has brought about is how commissions are paid out on Life Insurance policies. While this isn’t directly impacting you as the customer, you’re going to feel the side-effects of it, and that’s where things get a little complicated. 

What has happened now is that policies sold post-regulation (after October 15, 2020) now have a different commission structure. 

Before BOD-49, commissions were paid out in one large chunk upfront, with small ‘drip’ payments in the following months or years. But post-regulation, Advisors don’t receive that big chunk upfront anymore. To put it in perspective, if an Advisor stood to receive the US $100 in upfront commissions pre-regulations, they will now only receive $25 or $27, with the rest being spread out over the duration of the policy. 

Total game-changer. Why? Nobody with a short-term, quick-sale mindset is going to survive in this market anymore. Advisors who can consistently serve their clients and see a full payout over time are the only ones who can stay in the game. 

How does this change impact you further as a client? 

If you’re working with a good Advisor, someone who’s in it for the long run and can continue to service your contract long-term, then you’re in a great place. 

But if your Advisor is one of the 30-40% who is likely to exit the market because they just can’t make the numbers stack up anymore, then you will be left as what us Advisors call an ‘Orphan Client.’ 

Your policy will not be affected, per se, but you might not have anyone to carry out the service required to ensure it’s updated and serving you until you need it. 

For your existing policies and future policies, you will probably become a lot pickier about the Life Insurance Advisors you choose to work with – and vice versa. Advisors will be selective about their clients, too, because this isn’t just a one-off transaction anymore. The new regulations require an open, honest and transparent relationship to click into place. 

So, why all of these changes? 

The UAE market is heavily expat-driven and transient. Clients come and go, Advisors come and go, with the average duration of stay being 3-5 years. 

This created a short-term mindset of sorts and led to bad selling, poor Advisor service after commissions were paid, and other challenges. This also meant that the overall penetration of Life Insurance in the UAE stayed pretty low – only about 0.7% of the UAE’s population, compared to 9.6% in the UK. 

The UAE’s Insurance Regulatory Authority wanted to encourage a more service-minded, long-term mindset and more transparency in the industry, and so these changes are towards that end. 

I hope this clarifies all of these new regulations for you. If you’ve got more questions, feel free to drop me a line, and I’d be happy to answer them for you. 

Now is the time for you to dive into the fine-print, ask questions, check on your client-advisor relationship, and ensure that you are working with the right Life Insurance and Financial Advisor. 

After all, it is a product that’s going to kick into gear when you need it most and when you can do nothing to fix it. Establish total trust and understanding with your Advisor and your Life Insurance products, and you’ll be golden.