Newly introduced laws from the Central Bank of the UAE have excluded brokers from any other insurance-related profession or from being partners or agents for other insurance brokers.

The change aims to keep brokers within the boundaries of their professional role with a focus on core brokerage work. It is also prohibited to have direct or indirect contact with the policyholders clients of a broker at the inception or renewal of a policy. This is to prevent bypassing by insurers around brokers and not give them the due compensation from the insurance transaction.

It is also provided that insurance companies shall pay the agreed remuneration to brokers within the period provided in the Insurance Brokerage Agreement. This shall be paid no later than 10 business days following the receipt of the premium by the insurer from the policyholder. If the premium is paid in instalments, the remuneration of the broker should also be on the same basis and within the time limits. It means the brokers are paid on time in order to protect their commission earnings.

This new regulation will, according to law firm HFW, come into effect on February 15, 2025. The changes below are explained in detail by Sam Wakerley and John Barlow of HFW, partners, and also Thomas Neighbour, Senior Associate, and Benjamin Obinali, Associate. The Regulations embrace all onshore entities regulated by UAE, inclusive of insurance brokers, insurance companies, and foreign insurance company branches licensed to underwrite the primary insurance and reinsurance contracts, including Takaful. However, insurance brokers operating in financial free zones dealing in reinsurance have been exempted due to the presence of separate regulatory regimes.

Various prohibitions have been imposed so as to ensure good conduct by insurance brokers and their employees. Brokers are restricted to their broking activities, meaning they cannot be allowed to indulge in other insurance-related professions. Equally, brokers cannot outsource their broking activities to any other broker without having a written approval from the client and the insurer even when this is spread between the brokers operating in different countries. This assures that the client is kept well informed and at an advantage while his insurance issues are being worked upon.

Moreover, brokers cannot permit any unregulated individuals or other organizations to use their employees and agents to solicit insurance policies. Insurance broker regulations also ban the sharing of brokers' remuneration with other professionals in the insurance field. This ban, along with another that does not allow them to give any discount to their clients from the remuneration they receive from insurers, is intended to prevent price competition. Because these discounts must come directly from the insurance companies and not at the expense of broker earnings, manipulation of market prices will not be created.

The new regulations also implement a high level of professionalism for brokers. They shall guide their clients through the claim process, requesting support for missing documentation within two business days from the date on which the claim application is received. To this effect, the brokers will inform the clients at least 20 days in advance of policy lapse. Also, it was decided that the emails regarding policy details must be sent only from official email accounts. The motive behind such decisions was that everything should be crystal clear and that the brokers could provide their clients with all-round services at every stage of their policy cycle.

The noticeable change is that the broker shall not collect any claims settled from the clients. For instance, the insurer is supposed to pay their claims to the policyholders directly. This rule applies only to the primary insurance transactions because reinsurance activities are different and operate under various reinsurance brokerage agreements. In the case of mitigating conflicts of interest and hastening more direct settlement payments to policyholders, the new rules have removed the broker from the settlement process.

Accordingly, the HFW lawyers emphasized that under the new Insurance Distribution Directive, brokers are obliged to establish contracts with at least two insurers and reach an agreement on the contract's term, territory, classes of insurance, and commission. by law a broker cannot be held responsible for non-payment of premiums by clients and is not allowed to issue or vary policies or certificates except for motor certificates. This is meant to regularize the brokers' role in such a way that they do not cross their limits.