Abu Dhabi, Al Bayan, on 8 November 2016
Ibrahim Obaid Al Zaabi, Director General of the Insurance Authority said that the old vehicles insurance policies shall remain effective until the expiry of its term. Upon renewal, the insurance policy shall be made in accordance with the provisions of the vehicle insurance new regulation.
In an interview with Al Bayan Economy, Mr. Al Zaabi said that the Insurance Authority pushes the companies to provide the best insurance services at reasonable prices and coverages; contributing to improve the performance of the UAE insurance market and enhancing competitiveness.
He explained that the Insurance Authority has passed legislation including rules of practice of the insurance profession and ethics. This legislation shall be applied by the companies operating in the UAE in order to protect the rights of the insured and control the practices of insurance companies. As for the significant features of the unified new regulation of vehicle insurance, Mr. Al Zaabi added that the new regulation observes the UAE economic and social developments over the past years. Furthermore, the new regulation includes definitions of some terms that involved problems in application and caused many complaints, e.g. the definitions of accident, flooding, licensed driver and aggrieved party.
He added that the new regulation contains many benefits to policyholders and the domestic market. The most important benefits are represented in extending the insurance coverage against liability to cover the husband or wife, children and parents within the limits of sharia blood money, increasing compensation amount for each accident to two million dirhams and adoption of the missed benefit principle (replacement vehicle). Thus the companies are required to secure alternative vehicles for the aggrieved party up to ten days or to pay for the lease of alternative vehicle up to a maximum of AED 300 per day.
He pointed out the cases to recover the insured to the insurance premium when he desires to terminate the insurance policy or his vehicle suffers total loss during the period of insurance are resolved. The interview is as follows:
• What are the Insurance Authority’s plans for development of local insurance market’s performance and achieve a balance between the interests of companies and customers?
Federal Law No. (6) of 2007 on the establishment of the Insurance Authority prescribes several functions and objectives of the Insurance Authority in relation to the organization, development and supervision of the UAE insurance sector, protection of the rights of the insured and beneficiaries of the insurance products and monitoring the financial solvency of the companies to provide insurance coverage sufficient to protect these rights and to protect the national economy. The Insurance Authority promotes insurance awareness in the community.
The Insurance Authority pushes the companies to provide the best insurance services at reasonable prices and coverages; contributing to improve the performance of the UAE insurance market and enhancing competitiveness.
In this context and in order to protect the rights of the insured and control the practices of insurance companies, the Insurance Authority has passed legislation including rules of practice of the insurance profession and ethics. This legislation shall be applied by the companies operating in the UAE.
Under these rules, the Insurance Authority orders the insurance companies to practice business based upon the principle of absolute good faith; being one of the key principles upon which the insurance profession is based. The insurers will ensure the principle of disclosure and transparency in their transactions and comply with the legitimate practices towards insurance applicant, insured and beneficiaries.
Furthermore, those rules order the companies not to reject the insurance application or refrain from renewing the insurance policy or distinguish between the insured, unless it is based on actuarial or technical reasons or the company’s previous experience with the client.
• What are the main features of the new unified regulation for vehicle insurance?
The new unified regulation for vehicle insurance was issued after more than 27 years of effectiveness of both standard vehicle insurance policies issued in the 1987, after many amendments were made to the policies during such long period.
The new regulation observes the UAE economic and social developments over the past years. The new regulation includes provisions for insurance of loss and damage, as well as insurance of civil liability (known as third party policy).
The new regulation includes definitions of some terms that involved problems in application and caused many complaints, e.g. the definition of accident, flooding, licensed driver and aggrieved party.
Furthermore, it includes new sorting of provisions and chapters in such manner that it sets out the definitions and general terms and conditions, then the insurance company's obligations and the insured’s obligations, exceptions and cases of reference, termination and schedule of short terms.
Compensation and repair
• Does the policy deal with the foundations of compensation and repair?
Yes, under the said regulation, the company shall, when an accident occurs:
- Repair damaged vehicle or any of its parts or accessories and replace and reinstate affected spare parts.
- Pay the market value of affected vehicle(s) if the value of damage exceeds (50%) of the market value of the vehicle at the time of accident, provided that the company’s liability shall not exceed two million dirhams for each accident.
- Replace affected vehicle in the event of total loss with another of the same type, model, additions and last condition before the accident, unless the third party / aggrieved party requests to be compensated in cash, in this case, the company shall answer his request.
- The company pays the aggrieved party in cash, if requests so, the value of damage (loss or damage) of the affected vehicle wholly or any of its parts, accessories or spare parts along with the costs paid in relation to the installation, replacement and reinstatement of parts lost or damaged at the time of accident.
• Have you been dealing with the controversial cases of the insured’s recovery of the insurance premium when he desires to terminate the insurance policy or the vehicle suffers a total loss during the period of insurance?
The Insurance Authority resolved such problem on the basis that it sets timetable for recovery of the premium, according to the period in which the premium expires, called short terms schedule whereby the premium amount to be refunded to the insured is stated according to the validity of the policy.
• How does the Insurance Authority face the issue of predatory pricing between insurance companies?
The Insurance Authority strives through its supervisory role to promote fair and effective competition, provide better insurance services at competitive prices so as to correct any deviation in the market, and thus prevent Predatory pricing practiced by some companies during the previous period.
In light of the foregoing, the Insurance Authority issued a resolution whereby the insurance companies is required to review the pricing policy applied by the company in insurance products and state the basis on which the prices are determined and evaluate such policy through an actuary licensed by the Insurance Authority. Meantime, the pricing policy applied by the company shall be reviewed twice in the company’s fiscal year. The said resolution requests a statement of the adequacy of risk factors taken into account and the adequacy of the administrative expense ratios and the amount of profit margin.
Thus, thanks to the Insurance Authority’s policy, the prices began recovering gradually until a fair price is achieved so that the companies could provide insurance services easily and smoothly.
Key benefits included in the new regulation
Mr. Ibrahim Obaid Al Zaabi said that the new regulation, including vehicle insurance policy from loss and damage and civil liability, makes many benefits to policyholders and the domestic market at the same time. These benefits are as follows:
- Extend the insurance coverage against liability to cover the husband or wife, children and parents within the limits of sharia blood money.
- Increase the amount of compensation for each accident from AED 250,000 to two million dirhams.
- Adopt the missed benefit principle (replacement vehicle) and determine the equivalent thereof. Thus, the companies are required to secure alternative vehicles for the aggrieved party up to ten days or to pay for the lease of alternative vehicle up to a maximum of AED 300 per day during the repair of vehicle in the workshop.
- Obligatorily repair the damaged vehicle within the agency if the accident occurs during the first year of registration.
- Consider that the vehicle driver whose driving license has expired is a licensed driver if he can renew the license within 30 days from the accident.
- Cover how to resolve a dispute between the insurance company and the aggrieved party about the value of damage or the vehicle’s market value.
- State the basis of repair to estimate the deductible and mechanism of compensation.
The Insurance Authority strives to achieve the highest degree of balance and transparency in the new unified regulation, in line with the requirements of policyholder and companies and the interest of domestic market and national economy at the same time. This regulation provides to appoint an appraiser damage expert; being neutral to settle a dispute that arises on vehicle’s repair or value and others
Mr. Ibrahim Obaid Al Zaabi stated that the new regulation stipulates that the same shall enter into effect as of the beginning of the New Year. Currently, a study is conducted by the actuaries to state the impact of new coverages on the policy’s preliminary price so as to determine the mechanism to be followed in the prices tariff in accordance with the coverages included.
In regards to vehicles insured before the issuance of this regulation, the insurance policy shall remain valid until the expiry of its term and shall be renewed as per the provisions of the new regulation.
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