Insurer awaits new broker rules

Dubai: It's a piece of baggage the insurance industry could do without. Even as regulations governing other facets of the sector get their regular updating, there is the impression that those meant to govern brokers have a lot of catching up to do.

Apart from an odd change here and there over the years, regulations covering insurance brokers seem to be stuck in a time warp. At the start of the year, expectations were raised that the issue would be pushed up the agenda of the insurance industry regulator.

The market buzzed with many versions of what the regulatory overhaul would mean for brokers. And it was expected that all would be revealed by summer.

But summer has come and gone and the industry still awaits the regulations. However, Ashok Sardana, managing director at Continental Insurance Brokers, argues that fast-tracking regulations can prove counter-productive and that a lot of thought should go in before they are finalised and ready to roll out.

GULF NEWS: What exactly will the planned broker regulations bring about?

Ashok Sardana: It would weed out people who are unprofessional and coming in with their suitcases to sell insurance products when they are not licensed to do so. There will be more professionals with the right qualifications to give the right sales advice to clients.

But haven't clients by now learnt to make out the difference between a qualified broker and those who are not?

There has been an improvement no doubt in customer awareness, but there is always the chance some of them (insurance salesmen) could come in through some ruse or the other. We have to keep the consumer aware on an ongoing basis.

Even in the US and UK, which are highly regulated, there is a constant education of the consumer as to who they should be dealing with for their insurance requirements.

But hasn't the UAE's proposed version of broker regulations been a long time in the making?

Last year there were some changes and as far as I know the insurance authority and its players have been having serious discussions. They just want to make sure the implementation is done in a proper manner rather than have a situation where it is introduced and then having to go back to rectify some element.

They are taking a little time to understand what's right for this market, and that can never be faulted.

Will there be some major changes?

They will want all brokers to have some sort of minimum qualifications; inform the client what they are buying and any risks that may come with it. There should not be a situation where the client comes back after three or four years to say he was not informed.

Everything will need to be documented and that adds another layer of protection for the clients.

What sort of qualifications will the regulation require brokers to have?

There could be a couple of criteria and not a question of choosing one at the expense of another. But the regulation would have a certain minimum requirement and to start with it could be that anyone practising the business here should have the right credentials from his country or origin.

That should be okay. Or may be at some stage the local insurance authority could even have one of its own.

What sort of timeline is the industry looking at for the new regulations?

I would say more likely it would be in the first or second quarter of 2012. There always has to be a start and gradually it can be scaled up.

We can't wait for every-one to be a certified fin-ancial analyst or planner before the laws can come into effect. In the US once an insurance professional has completed the basic qualification, every year he needs to put in the 10 or 15 hours of mandatory education.

Coming to your own company, are you concentrating on a few lines of service rather than offer everything?

We try not to play with fire as much as possible. So our core strength is life insurance, critical illness, employee benefits and savings.

Life and savings represent the biggest part. Our biggest providers on the savings side are the European companies — Generali, Zurich, Royal Skandia, Aviva, etc.

There is a market for dollar-denominated products — if the client has been in the UAE for some time and is in a senior managerial level or has a certain amount of income these clients are very receptive to the dollar- or non-local currency denominated products.

How receptive is this market — a highly transient one at that — to life products?

It's not if the insurer or broker is not trying to push a product but sits down with the client to ask him what his plans are and then comes up with a solution. Insurance is about finding a solution to a problem.

Premium should not be the consideration when it comes to buying or selling a product, but to try and find a solution to a problem, be it funds required for children's education or a savings scheme for the family.

The average tenor for a savings plan would be more like 10 to 12 years. But it again depends on your requirements.

Are you pushing more Takaful products?

Takaful has a growing market, but the size is still limited. Our Takaful portfolio is quite small, at 1 or 2 per cent. This is not our focus currently as a company. Dubai would make up 65 per cent of the premium volumes, while In Abu Dhabi we are strong in group medical and employee benefits.

Do you see a lot of companies now actively seeking out employee benefit schemes? Or are these mostly confined to the local operations of international firms?

Even if they have only five employees, companies coming from Europe are providing medical and other employee benefits. The mid-sized companies would provide medical insurance though they may not be inclined to offer the best health care cover.

Everyone has a limit on the budget — what they do provide is not over the top, but not too basic either.

Some of the companies which are international and are quite profitable, they move with the European insurers. If the client companies are more of an SME type, they tend to go with local health care coverage.

Nearly 75 per cent of our portfolio in employee benefits premium would be with local insurance companies.

We have just started discussions with some of the employees for group life or group disability packages. Then we have voluntary schemes where the employees can choose to add on benefits like critical illness or disability insurance. They are paid on a monthly basis through a payroll deduction.

More and more insurers are getting into it because they realise it's more profitable whereas medical insurance is not.

Local companies can be just as active here because they can sell their products at less expensive rates. It's a big part of our overall business and remain so for the next three or four years.

Finding leverage through branding

It may be a sign of where the local insurance market could be headed in the years to come. Insurance brokerage houses are coming out with their own branded products and schemes to leverage their proximity to potential clients.

"The platform we are using is Aviva's, but the branding is entirely ours," said Ashok Sardana. "Yes 216 stands for youth education savings and you have 216 months to save for a child's education from the day he is born. The monthly instalment can be as low as $250 (Dh917.5)."

On whether other branded products are in the pipeline, he said: "We are thinking of a pensions product, but that would be at least another year because we want to focus on this.

"We have been working on this for the last two years. For instance, if you want to save $300,000 for the child's education, we will provide life insurance, critical illness and disability cover for the same amount.

"Unfortunately what we see is that people don't have the discipline of saving, even here. No one is saving, rather they prefer to buy whatever they want and then think of saving.

"When you are talking about retirement planning, it's not only about savings but when you want to retire, where you want to retire, what's the lifestyle you want to lead, etc. There should be a holistic approach and not say save $200,000 or $300,000 and then retire.

"We are looking at Africa, Qatar and Sri Lanka. If we can go to a country where we know the partner is strong, then why not?"