UAE Insurance Authority introduces regulations for online and electronic activities

The regulations (24 page / 332KB PDF) cover any business carried out by licensed firms through online, electronic and smart systems, including the sale and marketing of insurance policies, the collection of premiums and claims handling.

Financial services expert Tom Bicknell of Pinsent Masons, the law firm behind Out-Law, said the regulations come at a critical time given that the solicitation of insurance in person has been at an all-time low during the Covid-19 crisis.

“However, disrupting insurtech products have been changing the way insurance firms conduct business for some time – with better data analytics improving product offerings, the use of artificial intelligence reducing underwriting and distribution costs - which in turn helps create new revenue streams by delivering customised products and services to end users,” Bicknell said.

“In the onshore UAE environment, regulatory reform was required to keep aligned with such technological and business innovations. Although the new regulations introduce additional protection for consumers, there are significant compliance costs for business and firms operating in the sector need to be aware of the new regulatory hurdles,” Bicknell said.

The final regulations follow a lengthy consultation process, with a first draft published in January 2019 followed by a revised draft at the end of the year. Bicknell said businesses would need to familiarise themselves with the new regulations in order to review and amend their current contractual arrangements and internal processes, and should seek to obtain authorisation from the Insurance Authority as soon as possible.

Under the regulations, licensed insurance companies, brokers, and other firms such as actuaries or loss adjusters, must obtain pre-approval from the Insurance Authority to carry out any electronic or online insurance operations. The application process requires firms to submit an action plan setting out the projected volume of electronic operations for the next three years, an analysis of the risks associated with operating online or electronically and mitigating measures proposed, and a contingency plan to be followed in the event of any disruption to electronic operations.

In the event of non-compliance, the authority has the power to issue a warning, suspend a firm’s electronic systems, or cancel its approval to operate. It can also inspect a firm to ensure compliance. Any website carrying out insurance operations within the UAE without a licence from the Insurance Authority will be blocked.

If the management of a firm's website is outsourced to a third party, then prior approval from the Insurance Authority must be obtained and the outsourcing contract must require the counterparty to commit to complying with the regulations, the code of professional conduct issued by the Insurance Authority and other legislation.

The regulations prohibit insurance companies and professionals from dealing with price comparison websites, although brokers may work with such websites under certain conditions, including a requirement for the price comparison site to be registered with the Insurance Authority and established in the UAE.

Firms will have to set up an IT department to manage their online activity, and appoint a communications officer to monitor its content and customer requests, and ensure compliance with the terms of any outsourcing contracts.

Cyber security and data protection requirements will also have to be met, and companies and agents will have to communicate with customers using at least two means of communication.

The regulations also prohibit the sale of certain life insurance products online if they have an investment component.

Firms now have six months from 15 May, when the regulations came into force, to make sure they comply with the new rules.