Tag: Insurance

Insurance claims for damage caused by the torrential rain and floods

Early last week, the UAE experienced its most severe rainfall in the past 75 years. A large number of homes and business premises across the UAE suffered damage from the effects of the rain or floods, including the many motor vehicles that were stalled or otherwise impaired.

 

Those who are covered by home insurance policies may, depending on the terms of the policy, ordinarily expect to be compensated for the cost of repairs or replacement for certain types of damage including: (a) structural damage caused to premises and damage to the plumbing or electrical systems; and (b) damage to contents such as personal belongings, furniture, and electronic appliances. Businesses covered under property all risk and business interruption (PAR & BI) may, depending on the terms of the policy, ordinarily expect to be covered for the cost of repair or replacement of the damages as well as the loss suffered due to the interruption in business.

 

Careful review of the terms and conditions of a policy is essential in order to assess the extent, limits, and exclusions, applicable under the coverage of the policy.

 

Policyholders intending to submit a claim under a home insurance or PAR & BI policy should in the ordinary course:

 

(a) gather clear and contemporaneous evidence of the damage suffered and the exact cause(s) of such damage;

 

(b) take necessary measures to mitigate the damage, ideally with prior notice to the insurer providing sufficient details;

 

(c) inform and obtain prior approval from the insurer if there is a necessity to repair the damage pending the submission or approval of a claim;

 

(d) record and retain evidence of all costs incurred in the process of repairing the damage;

 

(e) be mindful that insurers may reject claims if steps taken by policyholders result in worsening the damage; and

 

(f) submit all claims to the insurer as expeditiously as possible following the claims procedure stipulated in the policy.

 

Dispute resolution

 

Insurance policies will generally be governed by Federal Decree Law No. 48 of 2023 On the Regulation of Insurance Activities (the Insurance Law). Pursuant to Article 101 (2) of the Insurance Law, if a dispute arises relating to an insurance claim, a complaint must be submitted to the Banking and Insurance Dispute Resolution Unit (BIDRU) instituted pursuant to Article 121 of Federal Decree Law No. 14 of 2018 (the Old Insurance Law). BIDRU is now known as the “Sanadak”. In terms of Article 2 of the Central Bank’s Regulation on the Establishment of an Ombudsman Unit for the United Arab Emirates (the Sanadak Regulation), the principal mandate of “Sanadak” is “to receive, handle, review and resolve Complaints in a thorough, timely, transparent, fair and legally sound manner.” Submitting a complaint to “Sanadak” is now the mandatory first step in any dispute concerning an insurance policy, and is a cost-effective option for policyholders who are dissatisfied with the manner in which an insurer has responded to a claim.

 

Determinations made by “Sanadak” concerning insurance disputes may be appealed to the Insurance Dispute Resolution Committee (IDRC) within 30 days from the issuance of the determination. In terms of Article 101 (5) of the Insurance Law, an insurer may not appeal decisions of the IDRC if the value in dispute does not exceed AED 50,000: such decisions are deemed final and enforceable immediately upon issuance. Where the value exceeds AED 50,000, the insurer may appeal the decision before the Court of Appeal within 30 days from the date of its issuance or when the insurer became aware of it. The insured may appeal a decision of the IDRC, before the Court of Appeal, irrespective of the claim value, within 30 days from the date of issuance of the decision or when the insured became aware of it.

 

Lastly, it is important to be mindful that “Sanadak” will not have jurisdiction over a complaint where the insurance policy provides for an alternative forum for dispute resolution. Article 7 (6) of the Instructions Concerning the Code of Conduct and Ethics to be Observed by Insurance Companies issued by the Insurance Authority pursuant to Board Resolution No. 3 of 2010 permits non-compulsory insurance policies to incorporate arbitration clauses. Apart from this, Article 2 (2) of the Insurance Law also provides that its provisions shall not apply to companies operating in Financial Free Zones i.e., the Dubai International Financial Centre and the Abu Dhabi Global Market.

 

Although the Sanadak mechanism came into existence quite recently, Afridi & Angell has assisted clients to make claims on this platform, which has been an efficient online service. The dispute resolution team at Afridi & Angell is well-equipped to advise on disputes arising out of insurance claims. ■

UAE Unemployment Insurance Law

In September 2022, the UAE introduced an insurance scheme pursuant to Federal Decree No. 13 of 2022 concerning unemployment insurance. This law was followed by Cabinet Decision No. 97 of 2022 concerning the mechanisms and controls for implementing the unemployment insurance scheme, and Ministerial Resolution No. 604 of 2022 concerning the unemployment insurance scheme (together with the Federal Decree, the Unemployment Insurance Law).

 

Applicability of the Unemployment Insurance Law

 

The Unemployment Insurance Law came into effect on 1 January 2023. It applies to all employees in the private sector and the UAE Federal government sector. However, certain categories are exempt from the applicability of the Unemployment Insurance Law, such as: investors (i.e., individuals who own their companies and work at such companies), domestic workers, workers under temporary contracts, etc.

 

As of now, the Unemployment Insurance Law is not applicable to employees of free zone companies.

 

Is it mandatory to subscribe to the insurance scheme?

 

It is mandatory for an employee (unless the employee is under one of the exempt categories) to subscribe to the unemployment insurance scheme.

 

What are employers’ obligations under the Unemployment Insurance Law?

 

There is no obligation on an employer to register its employees. However, employers are expected to encourage and direct their employees to subscribe to the scheme.

 

How much an employee is required to contribute?

 

Insurance premiums are calculated based on the basic salary of employees. Contribution of not more than UAE Dirhams 5 per month for employees earning a monthly basic salary not exceeding UAE Dirhams 16,000 (the Category 1) and contribution of not more than UAE Dirhams 10 per month for employees earning a monthly basic salary exceeding UAE Dirhams 16,000 (the Category 2), will be required to be paid.

 

Insurance payout

 

The insurance payout will be on monthly basis and will be equal to 60 per cent of an employee’s monthly basic salary subject to a maximum of UAE Dirhams 10,000 per month for the Category 1 employee and UAE Dirhams 20,000 for the Category 2 employee.

 

The insurance payout will be for a maximum period of three months for each claim.

 

Criteria for claiming compensation

 

The following criteria are required to be met by an employee to claim compensation:

 

(i) employee must have been insured for not less than a consecutive 12-month period;

 

(ii) premiums must be paid by the employee as per the payment schedule;

 

(iii) employee should not have voluntarily resigned;

 

(iv) employee’s employment should not have been terminated for disciplinary reasons;

 

(v) employee must be in UAE at the time of making a claim;

 

(vi) insurance claim should be submitted within 30 days from the date of termination of the employment or the decision from a UAE court;

 

(vii) employee should not have an existing complaint of interruption from work; and

 

(viii) claim for compensation should not be made through deception or fraud and place of establishment should not be fictitious.

 

Penalties for non-compliance

 

An employee who fails to subscribe to the insurance scheme will be fined UAE Dirhams 400. An employee who fails to make payment of the insurance premium for more than three months from the due date will be fined UAE Dirhams 200.

 

If an employee fails to pay the fine for three months from the due date, then the fine will be deducted from the employee’s wages through the Wage Protection System, end of service gratuity, or any alternative system.

 

Further, an employee will not be eligible for a new work permit until all due fines have been paid within the specified timelines.

 

Timelines for subscription

 

All current employees who fail to enroll themselves under the scheme by 30 June 2023 will be fined as per the aforementioned penalties. Employees who are starting employment after 1 January 2023, are required to enroll themselves within four months from the date based on the criterion mentioned in the Unemployment Insurance Law. ■

New administrative fines imposed by the UAE Insurance Authority

On 6 January 2019, UAE Cabinet Resolution No. 7 of 2019 Concerning the Administrative Fines Imposed by the Insurance Authority was published in the UAE Official Gazette, which lists a total of 204 items that are considered to be violations by the Insurance Authority and their corresponding penalties. This resolution will come into force on 6 April 2019 and will apply to any person, company or insurance–related professional1 that commits any of the violations listed in the resolution.

 

The violations set out in the resolution are broad in range and generally cover, among other things, the following:

 

• the failure to comply with the various regulations applicable to insurance providers and decisions issued by the Insurance Authority, including the UAE Financial Regulations;

 

• the performance of insurance-related or reinsurance activities or the opening of a branch within onshore UAE without obtaining the Insurance Authority’s approval or the necessary license; and

 

• the failure to provide the Insurance Authority with the required data, documentation, reports and notifications within the specified periods of time.

 

Most of the administrative fines range from AED 5,000 to AED 250,000 per violation. One exception is when a company opens a point of sales for insurance products without being licensed and registered with the Insurance Authority. This fine is AED 50,000 for each point of sales. The amount of any administrative fine may be doubled if a violation is repeated within one year from the date of the last violation with a maximum fine amount of AED 2 million.

 

Any of the administrative fines issued by the Insurance Authority may be appealed within 15 days from the date of the notification of the fine and the appeal must be decided by the Insurance Authority’s board of directors within 60 days from the date that the appeal is submitted.

 

Insurance and reinsurance providers should review the resolution and the list of violations to ensure their compliance prior to the resolution’s effective date and should also continue to monitor their compliance accordingly going forward.

 

The complete list of violations and administrative fines included in Cabinet Resolution No. 7 of 2019 can be accessed on the Insurance Authority’s website.

 

For more information, please contact the professionals listed in the column above, or your regular Afridi & Angell contact. ■

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1 An insurance-related professional is defined in the resolution as any entity or person that is licensed by the Insurance Authority to practice as an insurance agent, actuary, insurance broker, loss and damage adjuster, insurance consultant, health insurance TPA or any other insurance-related profession regulated by the Insurance Authority.