Insurance broking companies in the UAE will have to redraw their staffing policies, right from the very top brass all the way to the field sales staff, if draft regulations from the Insurance Authority are implemented.
The watchdog is looking to consolidate rules on insurance broking, online broking transactions, appointment criteria and qualifications for top positions at insurance broking companies.
The draft comprises 38 articles in 13 chapters that cover matters relating to insurance broking; covering licensing and registration, governance, obligations of the insurance broker and the insurance company’s obligations towards the broker, the rights of the insurance broker, solvency, financial reports and disclosures, mergers, dispute settlement, supervision and penalties.
The draft prescribes the criteria for filling positions in broking companies; including chief executive, operations manager, compliance officer, specialist or professional staff, branch executives and sales staff roles.
The general manager or chief executive must possess a university degree in insurance, financial science, law, or insurance-related science or its equivalent duly certified; or an Associateship of the Chartered Insurance Institute (ACII) in London or a certificate approved by a similar professional institute.
The draft regulations come in the wake of investment advisers in the UAE demanding the regulator prescribe minimum qualifications or certifications for financial advisers after the implementation of BOD49 regulations, which addressed issues related to mis-selling, overall commission payouts, upfront payments and fees and charges associated with investment products.
The draft stipulates that candidates for the top job must have successfully passed at least three training courses in insurance or insurance brokerage, and have practical experience in the insurance or insurance broking of not less than 10 years, or less than five years if he holds a higher academic qualification.
The experience required for a UAE national is at least five years, or two years if he holds a higher academic qualification.
What advice firms demand
Almost all advice firms support appointing qualified advisers to sell financial products; not only to ensure transparency for customers but also to maintain their own credibility.
“There is need for industry-recognised qualification for advisers. It should be mandatory for all advisers to be qualified to some level to provide advice,” Ashok Sardana, managing director of Continental Insurance Brokers and Apps zum Aktienhandel, said.
“We’re dealing with people’s life savings, retirement funds, etc., and we can’t have non-qualified advisers advising people.”
Navin Nihalani, founder and chief executive of Compass Insurance Brokers, concurs.
“Unprofessional or unqualified adviser, who does not understand the products, would mislead customers into buying investment products which may not serve their purposes.
“Credentials, such as the CFP or CFA designation, can give the confidence that your adviser has undergone rigorous professional education and passed qualifying exams that enable them to give sound advice.”
Sajith Marakar, managing director, Consolidated Services Bureau, surveyors based in Abu Dhabi, UAE, agrees.
“There is a felt need for appointing qualified professionals not only in top positions but field staff as well. The allegations about mis-selling of financial products are found to originate from entrusting the sales job to unqualified people.”
Online broking terms
The advent of the digital era has redefined the interaction between insurance sales practice by the brokers and the insurance companies.
The draft regulation requires the broker to develop and operate a website or smart app by setting standard technical interfaces for electronic linking with an insurance company.
The objective is to exchange information electronically with the insurance company’s IT systems for the purpose of exchanging basic customer information.
It is also aimed at enabling the insurance company to assess the insured risks.
Further, it requires providing the customer with a price offer for the insurance policy, the payment mechanism, and policy information, once issued by the insurance company.
The draft regulation proposes that the broker has to conduct the insurance request, by sending and receiving insurance offers, in real-time through the technical communication interfaces between his website or smart application and the insurer’s systems.
When dealing with the insurance broker electronically, the insurance company has to display the price of insurance products in line with the standards of sound technical underwriting, and to notify the insurance broker by electronic means when the insurance policy is issued, and to notify him of all the information on the policy, including the date of commencement and end of coverage, and the limits of coverage.
The regulator stipulates that insurance companies should deal only with intermediaries or price comparison sites licensed by the authority.
“Once these regulations are implemented, the industry will see a revolutionary change in the way business is done that will bring in more transparency, efficiency and benefit to the customers,” Marakar said.
New changes are bound to force brokers to recast their business strategy anchored on technology which will ultimately lead to the elimination of laggards.
