Electronic Insurance Regulation in the UAE: A Quick Analysis

The year 2020 has contributed and popularized the WFH culture. The millennium witnessed the empty malls which were otherwise crowded. The pandemic has already taught us to do things remotely. The Insurance Authority adopted this change so rapidly and as a result, they decided to regulate the electronic selling or online selling of insurance products with a view to safeguarding consumer rights.

The new regulation has been introduced in the Insurance Authority (‘IA’) Board of Directors’ Resolution No. 18 of 2020 Concerning the Electronic Insurance Regulations (the ‘Electronic Insurance Regulation’). The new regulation is applicable to all electronic and smart insurance operations practiced by licensed insurance companies, insurance-related professions [such as insurance agents, actuaries, insurance brokers, surveyors & loss adjusters, and insurance consultants] and marketing insurance policies through banks to the extent applicable to their nature.

The objective of this article is to briefly discuss the changes that are introduced by the new regulation.

Firstly, the Insurance Authority mandates that any entity must take a pre-approval to conduct insurance operations electronically, and in addition to a three-year action plan for the expected volume electronic insurance operations, a risk analysis associated with an electronic transaction [e.g. risks of cybersecurity, risks of adverse selection, money laundering and terrorist financing offenses in insurance activities, strategic risks and illegal access to the website] and steps to curb such interferences along with a contingency plan to be adopted when the electronic system is disrupted.

Moreover, the new regulation gives additional responsibility to the Board of Directors such as:

1. To adopt electronic insurance strategy along with a risk management strategy related to electronic insurance;

2. To provide necessary directives to the executive management regarding its implementation;

3. To appoint an internal supervisory control;

4. to supervise executive management during the implementation of these requirements.

Further, it has defined the responsibilities of executive management with regard to the electronic insurance strategy.

The new regulation strictly mandates that the insurance companies and the related professions shall follow regarding the following:

1. Appointment of an IT department to manage the website or obtain IA approval to outsource the management to a third party;

2. IA’s approval on the classes of insurance products that will be sold through its website;

3. Not to sell life insurance products that require specific underwriting to each individual case;

4. To adhere to data confidentiality of the customers and to the laws of privacy;

5. To conduct certain tests to ensure the cybersecurity standards and measures to upkeep the integrity of the websites.

Another important feature of the electronic insurance regulation is mentioned under Article 11 as the pre-contract phase. This article lays down the manner in which the insurance companies shall showcase the products that are intended to sell electronically. It mandates that the company shall provide all the required information such as nature of the products, its benefits, premiums, exclusions... etc. and warnings through which the customer shall take a well-informed decision.

Upon conclusion of the contract, an electronic copy [PDF format] of the contract with all required information such as commencement and expiry date, insurance application, policy terms, limits of coverage and the annexes... etc. shall be sent to the customer by e-mail or other electronic means as soon as they are issued. In addition, there shall be an active post-sales department which shall take care of requirements of the customer after the conclusion of the insurance contract such as making amendments, checking status, premium schedules... etc.

Further, it states that the companies which are committed to using a step-by-step approach for the disclosure of essential information of the policy shall ensure that the customer has read specified details related to the insurance application and they understand the legal consequences of their declaration, as determined by the nature of the product. The regulation strictly mandates that advertising shall be in compliance with the provisions of the code of professional practice, in addition to the prior written approval of the Insurance Authority.

The regulation has further defined and regulated the arena of price comparison websites and prohibited insurance companies and insurance-related professions from dealing with price comparison websites, save for insurance brokers. A set of rules has been ascertained to be followed by such websites failing which they will be liable for penalties.

While issuing the policies electronically the insurance companies and insurance-related professions shall:

1. Strictly follow the KYC procedures;

2. Establish an electronic account for each customer and implement procedures to protect their accounts;

3. Provide through their website, all the information necessary to the customer or the third party (the injured third party) to lodge complaints and follow up their status;

4. Strictly follow regulations combating money laundering crimes and the financing of terrorism or illegal organizations;

5. Report the any suspected activities [if any] to the competent authorities.

Written by:

Rajasree Ravivarma | Hussain Lootah & Associates