Insurance companies, brokers, consultants and investment advisers in the UAE will have to adopt new business and marketing strategies, particularly with regard to online and social media, after the Insurance Authority issued regulation around the sale of insurance electronically.
All insurance companies and related businesses carrying out operations through electronic means; such as agents, actuaries, brokers, surveyors and consultants, will require prior approval from the Insurance Authority.
An application must be accompanied by an action plan, approved by the company’s board; and contain analysis of the risk, projected volume and contingency plan for the electronic operations.
Ensure third-parties are regulated
The UAE Insurance Authority, on 27 April 2020, published the Insurance Authority Board of Directors’ Resolution No. 18 of 2020 on Electronic Insurance Regulations.
The first draft of these regulations was published in January 2019 and, after public consultation and discussions, a revised draft was published in December 2019, which has now been finalised.
The issuance of the regulations and the resolutions come at a time when marketing and solicitation of business by physical means is at an all time low following restrictions by the authorities around social distancing to check the spread of covid-19.
“This means that it is mandatory for insurers, brokers and advisers to develop a new business and marketing strategy if any part of their business involves electronic channels,” said Anand Singh, senior associate in the insurance and reinsurance practice at law firm BSA Ahmad Bin Hezeem & Associates, Dubai.
“Insurers currently use multiple online platforms for online marketing and selling, and a number of times this is carried out through third party entities, and it seems that the intent of the regulations is to ensure that all such third party entities who are engaged in insurance distribution in any manner are regulated,” he added.
Investment component
Life insurance policies with investment component cannot be transacted online, but the sale of policies with standard underwriting is allowed.
Health and general lines of business on property and liability, including marine cargo insurance, can be sold online and are subject to the regulations.
The term ‘electronic’ has been widely defined as anything relating to technology having electrical, digital, magnetic, wireless, visual, electromagnetic, automated, optical or similar capabilities.
The scope of the regulations extend to all electronic and smart insurance operations carried out on the internet address of the company; social media such as Facebook, LinkedIn; multimedia such as YouTube, Instagram, blogs; applications such as google doc, Wiki, AI based systems, text messages, instant chat channels and smart applications.
Dhruba Jyoti Sengupta, managing partner, Capstone Insurance, commented: “The Insurance Authority has decided to make this move at the right time.
“Given the new normal world that we all will live in, it is of utmost importance to ensure that customers who need insurance can select and buy products without the risk of face to face meeting.
“Face-to-face is now screen-to-screen. Those who accept this and adapt will survive.”
Data storage in UAE
The regulations stipulate that the website of the insurance companies should be maintained by an in-house IT department, but if the management of such website is outsourced to a third-party, then prior approval of the Insurance Authority must be obtained.
As for information security, the regulations require that the storage of data must be in the UAE and in the Cloud, though it is not specified whether the Cloud server must be based within the UAE.
Also, the regulations recognise that the respective systems of the companies may not be developed enough to carry out these operations and hence allow outsourcing of electronic operations.
They allow the use of third-party websites for the sale of insurance products but require prior consent of the Authority for any such arrangement.
The regulations also recognise, for the first time, “price comparison websites” and state that only an insurance broker can deal with a price comparison website.
These websites need to be registered with the Insurance Authority and a copy of the agreement signed between Insurance broker and price comparison websites must be shared with the Insurance Authority.
Singh added: “The prerequisites for registration of price comparison websites have also been listed in the regulations.
“The regulations state that application for registration must be made in accordance with the applicable regulations, implying that the Insurance Authority may be issuing regulation on price comparison websites shortly.”
The provisions shall apply from the date of publication of regulations in the official gazette, but also allow insurance companies and insurance related professions a time period of six months from the date of publication of the regulation in the official gazette to align their position and operations.
Price comparison websites
While the recognition of price comparison websites is a step in the right direction from the UAE Insurance Authority, given the global trends in this regard, the requirement for a price comparison website to deal only through a broker creates an extra layer of regulatory requirement and therefore unnecessary costs, the benefit of which could have been passed on to end customers in the absence of such requirement.
Insurance markets globally have noticed a surge in demand for insurance policies sold online and, therefore, this regulation brings the much-needed clarity, which will help further growth of the UAE insurance market.
Sengupta added: “Once IA comes up with detailed guidelines all existing and new companies will have to abide by those guidelines. This will be extremely beneficial for the growth of the insurance industry in the UAE.
“Such regulations/guidelines will make insurance industry more robust and help win the confidence of customers.
“Irrespective of regulation, every industry needs to adopt a sales and marketing strategy that reflects the choices of customers. Gone are the days when most of us went to a shop to buy a mobile phone, laptop or groceries.
“The number of people who still go to brick and mortar shops will also drop dramatically in the post-covid world. This means that not just insurance but every industry will have to digitise their sales process to survive,” he said.
