THE PROBLEMS OF THE INSURANCE MARKET IN THE UNITED ARAB EMIRATES AND PRACTICAL PROPOSALS TO SOLVE THEM.

 

 

In this research we will discuss the problems of the Insurance Market in the United Arab Emirates and Practical proposals to solve them. We divide this research into two chapters. The first one tackles with the problems related to the insurance market in general and the second chapter related to the problems in the market in certain class of insurance business and we followed these chapters by the conclusion at the end.

 

 

 

 

Prepared by

Layth Al Sabbagh (M.Sc – Law)

 

CHAPTER ONE

THE PROBLEMS RELATED TO THE INSURANCE MARKET IN GENERAL

 

In this chapter we will discuss the problem in the insurance market in general as follows:-

 

CUSTOMER SIGNATURE

This issue is related to the signing of the policy by the insured. We observed certain proportion of the policy where not signed by the insured although it contains terms and conditions of which the insured should be aware and the signature represents the evidence of that. We understood that the practice enforce to issue the policy without requesting the customers signature specially on Motor policy. Since the wording of this policy is unified and the customer used the policy in Traffic Department which represents approval from his side. But on the other class of business we believe the signature of the insured is important.

 

THE PRINCIPLE OF HANDWRITING TEXT:

It is recommended in either Insurance Policy or Discharge Receipt where a customer signs, the company’s representative should advice and request the customer to write his/her name along their signature. The reason behind that particular act is to confirm that the insured agreed to the contents mentioned in the policy. If for some reason he change his signature or denied it or it doesn’t match the original signature, at that time we can approve that the customer agree on the policy terms and conditions through his handwriting of his name.

LOSS ADJUSTER REPORT

The loss adjuster whether appointed by the court or by the Insurance Company. If the expert appointed by the Court then it is difficult to approve any thing against his report but if the expert is appointed by the Insurance Company then the Court will not rely on his conclusions, although there are many cases that need technical experts and specialist to conclude the matter of the Claim. According to that we need to put a flexible procedure to appoint the Loss Adjuster before the Court cases starts. For instance, Emirates Insurance Association or Ministry of Economic may play a crucial role on appointing the Loss adjuster and they should recommend certain expert to fulfill and verify the Claim at the spot of the Incident.

 

INSURING THE WHOLE COMMUNITY

The idea of insuring the whole community will effect positively on the Insurance industry in the United Arab Emirates and this will offer more opportunity to introduce new Insurance products. For instance, products that are related to the professional indemnity and such new products will indeed raise the volume of the premium within the country.

 

DISTRIBUTE THE INSURANCE CULTURE AND AWARENESS

It is very important to spread Insurance culture and awareness among the whole community as there are certain factors that have a negative impact on the Insurance industry like the religion belief restrictions and lack of awareness. This issue requires attention, big efforts and coordination of the governmental and educational Organizations and also requires the cooperation between the Insurance Company and the Research Centers to spread the Insurance awareness.

 

LEGAL CULTURE AND AWARENESS

The Insurance Conference and the workshop should be held regularly and periodically among all Insurance Companies and the court judgment should be distributed by the Emirates Insurance Association to all the Insurance Companies. It’s important to publish all the court judgment even the first level of the Court Judgment specially as it contains an interested argument and justification which represents the court tendency within the country and such court decision may help to evaluate the bodily injury indemnification which could help to settle the dispute between the injured person and the Insurance Company amicably.

 

THE RETENTION PREMIUM AND THE REINSURANCE PROCESS

Most of the Insurance risks in the UAE market reinsured with the International Market and minor proportion were returned by the local market. According to that the Local Companies should increase the financial capabilities and should increase their retention also.

 

NEW RULES AND REGULATIONS ON THE INSURANCE FIELD

The Insurance Industry witness rapid growth and such growth needs new or upgraded Law to be issued specially in the field of the Motor in order to avoid many problems related to the terms and conditions of the policy.

ENCOURAGE THE MONITORIAL INSURANCE ORGANIZATION

Ministry of Economic plays a crucial role in monitoring Insurance Business in the country and their role should be encouraged to protect the customer and the Insurance Company interest and to solve their problem.

 

DISSOLVING OF THE INSURANCE COMPANY

Periodical verification should be imposed on all companies working in the Insurance Sector to ensure that they have adequate financial power and they are ready to bear the Insurance risks which they deal with.

 

UNDER INSURANCE AND ABOVE INSURANCE

Above Insurance is an important matter because if the sum insured is more than the value of the subject of Insurance then the indemnification will not be more than the actual value.

Under Insurance occurs while the sum insured is less than the value of the subject Insurance. This happens when the insured desires to reduce the premium or when the value is increased due to the inflation factor (Insufficient Insurance). According to that its important to stipulate the average clauses in the policies specially the UAE market witness the phenomenon of adding the Bank interest on the value of the subject Insurance (Motor Insurance).

 

THE EXECUTION OF THE APPEAL COURT JUDGMENT

Its important to hold a conference and workshop regarding this issue to explain the Insurance Company’s point of view regarding the execution of the appeal judgment specially there are articles in the Law regulates this issue and leave it to the decision of the court .

STRENGTH THE CONFIDENCE IN INSURANCE COMPANIES

Its important to strength the confidence in the Insurance Company and spread positive idea in the community about the Insurance Company activities instead of the negative ideas and defend on the Insurance Companies point of views by preparing articles and research which highlight the role played by the Insurance Companies in the country.

 

THE WORDING OF THE INSURANCE POLICY

The Insurance Company relies on the wording of the International wording policy and such wording doesn’t match on a certain cases to the local market requirement.

 

THE DIFFERENT LEGAL SYSTEM

There are certain policies reinsured in the International Market and the wording of certain policies as per the reinsurance policy wording and on certain cases, the laws in the UAE differ from the laws in the International Market which undoubtedly affects the liability of the Insurance Company and the scope of the cover.

 

TRANSLATION OF THE POLICIES

In addition to what was mentioned in the previous two paragraphs, most of the policies are issued in English Language although the law in United Arab Emirates assumes that the policy should be issued in Arabic or translated to it. All these issues represent a problem in the UAE Market and should be tackled through many methods, one of which is by reviewing the policy according to the Market needs and by preparing legal precise translation to the policies and study all legal issues related to such policy on the local Market.

 

THE VIEWING OF THE COURT TO THE INSURANCE COMPANIES

The court judgment considers the Insurance Company as a full financial power organization and there is no problem if they are legally obliged to pay whatsoever amount to the injured person irrespective of the actual loss to the plaintive. In order to avoid such problems, its advisable to hold a conference periodically, prepare studies and also to avoid such issues its strongly recommended that there should be a specific court handling Insurance cases only.

 

THE FABRICATION OF THE CLAIMS

On a certain cases there is fabrication of claims which costs the Insurance Company huge amounts and a lot of effort should participate to prevent such cheating against the Insurance Co.

 

THE EXPERIENCE FROM THE NEIGHBOR COUNTRIES

The local markets needs to take the experience from the neighbor countries and study their rules & regulations appropriately to take any advantages and apply the same in the United Arab Emirates accordingly.

 

THE PHENOMENON OF BURNING PRICES

The problem of burning prices due to the competition among Insurance Companies impact negatively on the Insurance industry in the country and this issue should be dealt very carefully by the monitorial organization.

HUMAN RESOURCES

Insurance Companies needs qualified people. The local market is facing problems with recruiting people of the right caliber specially hiring qualified people in the Insurance sector and this issue should be handled by giving more training to the staff or opening Insurance Institutions within the United Arab Emirates.

 

WORKING WITH HIGH PROFESSIONALISM

The professionalism of the Insurance Company should be on a high level and there should be no delay from the Insurance Company in performing their obligation. Emirates Insurance Association should monitor this issue.

 

ENCOURAGING STATISTICAL STUDIES

Statistical studies should be encouraged as it is an important element in the Underwriting operation. This matter needs more effort and co-operation from the Insurance Companies to prepare accurate statistical studies and distribute such reports among all the Insurance Companies. Also it is important to take benefits from the neighbor countries.

 

ORGANIZATION OF THE WORK OF INTERMEDIARIES

The Broker plays a crucial role in the UAE market. This role needs more organizations and new laws should be legislated.

 

THE USE OF MODERN TECHNOLOGY

Insurance companies need to take the advantage of the technology which will reflect positively on the quality of the business in all the Insurance Companies within the UAE.

AFFECTION OF THE INTERNATIONAL TRADE (GATT)

Its important to highlight all the results that will appear due to affection of the International Trade (GATT). A new internal regulation should be issued to regulate the insurance business in Country in order to protect the interest for the Local Insurance Companies and increase their capabilities in such environment.

COLLECTIONS OF THE PREMIUMS

There is a considerable proportion of the premium which is difficult to be collected. The market witness frequent return checks and the Insurance Companies should develop internal rules for granting payment facilities in order to avoid such problems.

AMICABLE SETTLEMENT

Amicable Settlement between insurance companies represents the idea of cooperation between insurance companies where all of them are operating in the UAE and certain rules should be adopted to solve all the disputes between them through the Emirates Insurance Association Committee. All the Insurance Companies shouldn’t approach Legal channel directly unless they fail to solve their problem through the Emirates Insurance Association Committee. This practice should be adopted by all Insurance companies within the United Arab Emirates.

 

CHAPTER TWO 

 

THE PROBLEMS IN THE MARKET FORCERTAIN CLASS OF INSURANCE BUSINESS

 Chapter two deals with the obstacles arising in the Insurance market for a particular type of Insurance. We will precisely highlight the problems that prevent Insurance Company from achieving their goals relating to the Motor Insurance field. Subsequently to that we will also discuss the problem concerning the Medical and Health Insurance business especially as there are substantial growth of this class of Insurance within the United Arab Emirates.

 

 Section One

THE PROBLEMS RELATED TO THE MOTOR INSURANCE BUSINESS:

 Motor Insurance occupies a huge space in the Insurance market in the State. Thus we prefer to discuss this type of business in depth, through highlighting the most common obstacles faced by Insurance companies, as follows:-

-               Regular meetings between representatives of Insurance companies and representatives from the traffic department in each Emirate should be held in order to discuss all the problems being faced by the Insurance companies with the traffic department.

-               Most of penal judgments in traffic accidents cases condemn the vehicle driver as full criminal responsibility irrespective of the fault of the injured person. For instance, crossing highways from the prohibited area claim no responsibility on the driver. All research confirms that there is no responsibility on such cases. However, we observe that the court judgment accuses the driver although there is no fault from his side .This phenomenon leads to punish innocent person and to burdening insurance companies with claims that should not borne by them.

-               Insurance companies representation in criminal cases. This fundamental means that the Insurance Company has the right to attend with the insured that has been charged criminally and submit its defense specially the Insurance Company will bear the cost of the accident on behalf of the insured noting that the UAE Law permits the Insurance Company to attend but this practice had not done for a while.

-               According to the rules and regulations applicable within the United Arab Emirates, the wording of the Motor Insurance policy should be as per the Specimen approved by the Ministry of Economy and the Insurance Company has no right to change the Terms and Conditions mentioned in the Unified Motor Insurance Policy Wording. In spite of that the court assumes that many clauses mentioned in the Motor policy wording are unfair and shouldn’t be applied because it symbolizes the abuse of the rights.

-               The policy wording stipulates that no admission or promise of payment shall be made by the insured without the written consent of the Insurance Company. We observed most of the penal judgments refer to the acknowledgement of the insured being responsible for the incident although there are certain reasons that the insured acknowledges the fault. The very first reason being the Psychological and surrounding pressure that enforces the insured to acknowledge. The second reason is a result of lack of information and awareness from the insured side, and final reason being the satisfaction that the Insurance Company is responsible for paying the indemnification. This problem can be tackled by attending the Insurance Company in the Criminal Case.

-               The role of Insurance companies in promoting traffic awareness in the UAE. This role is almost non-existent within the United Arab Emirates. Despite the fact that such contributions have a significant impact in reducing the accidents and thus reducing the losses of Insurance companies consequently. Therefore, the Insurance companies should pay more concentration through coordination with the associations concerned with Traffic safety to raise the awareness in the community.

-               Inaccurate medical reports will affect negatively on the Court judgment and obviously effect the decision of the Court. Medical report should be accurate and clear in order to help the Court to give the injured person what he deserves. It is noted in this regard that UAE Labor Law regulates this matter by putting certain Scales for all types of disabilities and that Scale could be a reference for all types of the incidents and accidents.

-               As we mentioned earlier that the Ministry of Economy is entitled to impose a control among all Insurance Companies. In the Motor Side all the Insurance Companies should adhere to the Ministry regulation related to the Motor Tariff. We acknowledge that such interference is necessary to protect the interest of the insured and it is a kind consumer protection but we recommend that such interference should not only impose on the Insurance sector but also on the Car dealers (Car Agencies). Especially we observed that the cost of prepare is extremely high and there is a lack of competition in that particular area.

-               The rates and tariffs for motor insurance business should be reviewed periodically. The rates and pricing process should be according to certain criteria. For instance, the age of driver, his occupation, brand of vehicle, and the claim history, all of these factors should be considered on the pricing process while the system at present disregards all of these factors.

-               Establish special arrangements to cover the victims of non insured drivers by establishing indemnification funds and these funds will be financed through many channels.

-               Co-ordination between Traffic Department and Insurance Company by providing the Insurance Company the privilege to check the personal records for the Insured in the Traffic Department and spend efforts to arrange electronic connection between the Insurance Company and the Traffic Department.

-               The settlement of the Claim between the Insurance Company shouldn’t be through the legal channel and there are cases related to the breaches of the insured which shouldn’t allow the Insurance Company to reject the Claim. It is strongly recommended that the Insurance Company settle the Claim and proceed with the recovery action due to the breaches of the insured and this thing will  prevent the delay on recovery procedures and reduce the cost of the claim ( by omitting the legal expense).

-               The depreciation should be applied to the Vehicle on the basis of the date of use of the Vehicle and not on the model basis.

-               Safety road and traffic measurements which could have a positive effect on the Insurance activities in the Country and the procedures as follows:-

Ø     Periodical evaluation should be done to the Traffic awareness programs.

Ø     Continuous improvement in the roads networks in the country and highlight all the problems on such networks.

Ø     Prevention should be taken on the people crossing the roads from the Prohibited areas and impose high fees on such negative behavior specially as there are large percentage of accidents due to this issue.

Ø     Respect of Traffic rules by teaching children on the primary studies. The children should be taught in their primary classes to respect the Traffic safety rules and to adhere on the same. Some colorful books with nice pictures should be published to attract children’s attention to have the benefit of and get pleasure from studying these kinds of books.

Ø     Psychological Analysis for the drivers and their behavior and determine the elements which affects on the road accidents.

Ø     Study the percentage of the traffic accidents on each emirate and compare it with the other emirate to monitor the differences and conclude what the particular emirate with the most number of accidents lack and where does it require improvement.

Ø     Distribute traffic awareness among the community.

Ø     UAE law should increase the level of punishment on certain accidents for instance driving without license, or under the consumption of alcohol or anybody driving recklessly for whatsoever reason as these are the major reasons for accidents nowadays.

Ø     Bring into attention the safety rules and precautions that should be taken by the Taxi drivers to avoid habitual lame accidents and to increase their knowledge on the level of awareness on the safety rules.

Ø     Distribute Traffic awareness to all community through all media like giving advertisement in the Television, Radio and Newspapers etc. in order to reduce the accidents in the country.

Ø     Arrange special training for the policemen to improve and enhance their capabilities to differentiate between the fabricated claims and the genuine claims and the police report to be prepared accurately containing all the details of the accident.

Ø     Prevent the parking of the Vehicle on the footpath particularly as this thing will enforce the walking people to walk on the street instead of footpath which puts them into threat of accident.

Ø     Special underground parking should be arranged to avoid jam parking on the road in front of the Insurance Companies.

Ø     Increase the level of punishment on the driver who escapes from the place of the accident.

Ø     Prevent individuals and vehicles in making the accident area crowded by slowing down their car speed and gazing at the accident area because this thing will cause hindrance for the policemen in performing there duties.

 

Section Two

MEDICAL INSURANCE

Ø     UAE market observes huge growth in the medical Insurance business and this thing will come across certain problems specially this kind of Insurance is related directly to the people’s health and their life. According to that certain procedure should be followed:-

-               Distribute medical Insurance awareness among all the policy holders.

-               Enhance the hospitals performance which reflects positively on this class of business. Specially if some particular disease is diagnosed in an early stage, this will definitely reduce the cost on the Insurance Company.

-               Impose certain tariff on the medical service and monitor it continuously, specially the cost of such service will reflect on the cost of Insurance.

-               Insurance Companies needs qualified people in medical Insurance sector. The local market is facing problems with recruiting people of the right caliber specially hiring qualified people in the Insurance medical  sector and this issue can be handled by providing more training to the staff or opening Insurance Institutions within in the United Arab Emirates.

-               Booming of the Medical Insurance Sector in the market directly affects on the effort of the Insurance Company. We have come across many cases where the client searches for the cover himself but its difficult to find it.

-               The misuse of the insurance medical health card by the insured which affect negatively on the Insurance Company and represent one of the problem in this kind of the business. Also we observed many cases that the patients sign on a blank form in the Hospital.

 

ABSTRACT

 

This research is meant to study the problems relating to the Insurance Market in the United Arab Emirates and offering practical solutions to solve them. Accordingly the research is divided into two Chapters and a conclusion at the end. Chapter one converses about the problems related to the Insurance market in general and chapter two highlights on the problems in the market for certain class of Insurance Business. Chapter two is hereof divided into two sections. The first section discusses about the problems related to the Motor Insurance Business and the second section discuss about the problems related to the Medical Insurance Business. Below is a brief description on these two chapters:-

 

Ø     We observed certain proportion of the policy where not signed by the insured although it contains terms and conditions of which the insured should be aware and the signature represents the evidence of that.

 

Ø     We discussed the idea of insuring the whole community as it will affect positively on the Insurance industry in the United Arab Emirates and this will offer more opportunity to introduce new Insurance products which will raise the volume of the premium within the country.

 

Ø     We conclude that it is very important to spread Insurance culture and awareness among the whole community. This issue requires attention, big efforts and coordination between the Insurance Company and the Research Centers to spread the Insurance awareness.

 

Ø     We observed that the Insurance Industry witness rapid growth and such growth needs new or upgraded Law to be issued specially in the field of the Motor.

 

Ø     We noticed that its important to strength the confidence in the Insurance Company and spread positive idea in the community about the Insurance Company activities by publishing articles and highlighting the role played by the Insurance Companies.

 

Ø     As discussed earlier in this research that most of the policies are issued in English Language although the law in United Arab Emirates assumes that the policy should be issued in Arabic or translated to it. This issue can be tackled by preparing legal precise translation to the policies.

 

Ø     Regarding the loss adjuster report we suggest a certain mechanism to elect the expert through the Emirates Insurance Association or Ministry of Economic to fulfill and verify the Claim at the spot of the Incident.

 

Ø     We noticed that on a certain cases there is fabrication of claims which costs the Insurance Company huge amounts and thus we suggest to handle this issue with a lot of effort to prevent such cheating on the Insurance Co.

 

Ø     We considered that its important to highlight all the reason appearing due to affection of the International Trade(GATT). According to that a new internal regulation should be issued to regulate the insurance business in Country.

 

Ø     We noticed that the market faced obstacles on the collection of premium and we suggest the Insurance Companies should develop internal rules for granting payment facilities in order to avoid problems.

 

Ø     We emphasize that all problems of the Insurance Company should be solved through the Emirates Insurance Association before approaching any legal channel and this process should be adopted by all the Insurance Companies. 

 

CHAPTER 2 DEALS WITH THE FOLLOWING:-

Ø     We think that the Insurance Company has the right to attend with the insured that has been charged criminally and submit its defense noting that the UAE Law permits the Insurance Company to attend.

Ø     We highlight the role of the Insurance Company in spreading Insurance awareness within our community and periodical review and evaluation for Motor tariff and monitoring the cost of Vehicle repair from the agencies and establish indemnification funds to cover the injured person.

Ø     Section Two is meant to study the problem related to Emirates Insurance Association and certain recommendation given to enhance the hospitals performance which reflects positively on this class of business. And highlight on the importance of hiring qualified people to work in this sector.

 

Ø     Also the research discussed the issue of the misuse of the insurance medical health card by the insured which affect negatively on the Insurance Company and represent one of the problem in this kind of the business.  

 

At the end it’s important to emphasize that the main solution for all these problems is to spend the effort by all the Insurance Companies working in the United Arab Emirates to the Emirates Insurance Association where it is the entity working on behalf of all Insurance Companies and could solve all the problems related to them.