2 Steps Forward for Insurance Regulation in UAE?
The 20-page Decision #49 from the Insurance Authority has left me a little disappointed. Important changes will arrive in 2020 for retail insurance and insurance-based investment products sold in UAE. However, areas remain which, in this adviser’s opinion, need to be addressed. This is for the long term benefit of clients and the sector as a whole.
After years of consultation, there are only minor improvements aimed at curbing the worst of the behaviour in the market. Potentially, the decision could have delivered the world-class regulatory framework residents of the UAE deserve. Here are 3 suggestions for the regulator:
Surely, this is needed. As a group, financial advisers are vilified for their commission-hungry, unethical practices. So why not switch to a fee-only model? Or force commission disclosure on them as was done over 25 years ago in my home country of the UK? Making clients aware of the charges they are paying for advice had the effect of bringing down costs and increasing transparency. Transparency has been shown to increase trust, a vital component of the adviser/client relationship.
Basic Qualifications for Advisers
Another area which has slipped through the net in the final draft of decision #49 is the requirement for financial planners to have any relevant qualifications. How is it possible for a person with no professional qualifications or experience to charge for their advice? You may as well as the ‘bloke down the pub’ for his opinion – at least he will not charge you, except perhaps a pint or two.
Over 6 years ago, Securities & Commodities Authority (ESCA), the investment regulator in the UAE, announced a minimum qualification requirement. This was equivalent to a high school diploma. Whilst many people took the tests, I am not aware of anyone being prevented from acting as an adviser for failing the test.
There are high quality, ethical advisers in the market. I work with some of them. Surely these advisers who have demonstrated a commitment to their chosen career deserve some form of recognition?
RERA requires individual real estate agents to be registered with them. Surely, it would not be too much to ask for the Insurance Authority to do the same. This would also enable potential clients to independently verify advisers’ qualifications, history of complaints and whether they are working for a licensed company.
Working with licensed advisers provides clients with recourse to the regulator if something goes wrong. So providing a register of advisers which the public can access should reduce the number of unlicensed advisers operating in the UAE.
Nigel Sillitoe has started a service called Which Financial Adviser (visit here) this allows advisers and companies to register on a voluntary basis. This is an excellent initiative, but it needs backing by the relevant authorities and wider promotion to be effective.
I am a professionally qualified financial planner with a 1st class honours degree in financial services and over 30 years of experience in the sector. I have been a resident of the UAE since 2001. Get in touch if you would like to discuss any of the points raised in this post or on the blog.