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Landmark legislations that changed UAE’s personal finance landscape in 2020

Updated: Dec 18, 2020

The Legislations changed UAE’s personal finance landscape in 2019 are insurance regulations, employment updates in the country's financial free zones and new insolvency laws.

New laws this year have helped protect consumers and businesses, as well as employers and employees, from financial losses and other money-related issues. Photo.

Previous Year was dotted with laws that changed the UAE’s personal finance landscape — most notably insurance regulations to protect consumers, updates in the Dubai International Financial Centre (DIFC) and Abu Dhabi Global Market (ADGM), and a new insolvency law that will help individuals in debt.

Here we will discuss the changes, for individuals and businesses in the UAE, and what 2020 has in store.

Insurance Authority regulations

The Insurance Authority first declared its intention to overhaul the industry in November 2016 in response to “an alarming amount of complaints” over how savings, investment and life insurances policies are sold in the Emirates.

The government authority released its latest draft of the new regulations on January 31 2019 and the final regulations were published in the Official Gazette on October 15 2019. they will come into force six months thereafter, in mid-April of 2020.

The Measures

The measures include a commission cap of 4.5 per cent for lump sum investments and fixed-term contractual plans — in contrast to previous commission payments of up to 10 per cent. Sales advisers must also provide customers with a detailed schedule of all charges for the entirety of a policy’s life cycle and customers have the option to cancel a policy within 30 days.

Who are the Skate Holders?

These regulations will benefit insurers as well as policyholders in the long run and will have a positive impact on the market, although, in the short term, we may see some consolidation in the insurance intermediaries’ space.”

The Insurance Authority will approve life insurance and other wealth insurance products before they can be sold to customers. Insurance brokers will also need to be registered as insurance producers.

Previously, there was a loophole whereby the insurers, which were not regulated in the UAE could distribute life insurance via insurance brokers, who were registered in the UAE but were not knowledgeable about the product they were offering to the consumers.

The Insurance Authority also issued Resolution No 33 of 2019 in July, which formed “Committees for the Settlement and Resolution of Insurance Disputes” to address complaints made by an insured person against any company licensed to carry out insurance activities in the UAE.

“The committees can award damages — plus interest — in respect of the amount the customer is entitled to recover under the insurance contract

The Committees for the Settlement and Resolution of Insurance Disputes has allowed consumers to claim damages from an insurance company. DIFC updates

In June 2019, Sheikh Mohammed bin Rashid, Vice President of the UAE and Ruler of Dubai, enacted two new laws in the DIFC: an insolvency law to facilitate bankruptcy restructuring and employment law to replace the one enacted in 2005. The insolvency law, No 1 of 2019, went into effect that same month and the DIFC Law No 2 of 2019 came into force on August 28 2019.

The insolvency law provides an administrative process where there is evidence of mismanagement or misconduct. It comes after the high-profile collapse last year of private equity firm Abraaj.

The employment law contains several updates, including the introduction of five days’ paternity leave for the first time, safeguards against discrimination, changes in sick pay and gratuity protection.

For example,

  • While discrimination was addressed in the 2005 law, it was limited and offered no way of recourse.

  • Age, maternity, pregnancy have all been added into the mix as a protected characteristic of a discrimination claim, but also now the discrimination claim actually has a remedy.

  • Potentially you could claim up to a year’s salary if you can prove that you have been discriminated against or victimised during your employment.”

  • In the past, employers were able to withhold gratuity payments if employees were fired for cause. With the new employment law, “your end-of-service gratuity will no longer be affected.

  • The DIFC has tried to align themselves with international standards and best practice and, therefore, the end-of-service gratuity is seen as a savings pot that shouldn’t be touched.

  • At the same time, the DIFC has introduced a revised employment contribution plan to replace gratuity, known as the DIFC Employee Workplace Savings Plan (Dews). This was scheduled to be rolled out January 1 but was postponed to February 1 to give employers more time to implement either the new plan or another “qualifying alternative scheme.

  • Previously gratuity system, employers had to pay 21 days of an employee’s basic wage for each year of the first five years of service and 30 days of the wage for each additional year of service. The Dews scheme imposes mandatory contributions from employers monthly into a fund that will generate returns for employees.

The Dews scheme is a positive development in that it puts an end to an open-ended liability in terms of end-of-service benefits and encourages transparency vis-à-vis the employees — the contributions being fixed and foreseeable.

ADGM updates

ADGM, the financial free zone which was opened in 2015, issued its new Employment Regulations in October. which has come in to effect from 1st Of January 1 2020, the changes included the introduction of overtime compensation and a repatriation flight ticket allowance. As in, the DIFC, it reduced sick pay to align with international standards more closely.

So, it’s a positive change for the employers is that sick pay will be reduced from 60 to 10 days of full pay, 20 days at half pay and 30 days without pay in 12 months, after which an employer may dismiss an employee with written notice.

Insolvency Law

The UAE Cabinet passed a new insolvency law, Federal Decree-Law No 9 of 2019, to protect and support individuals in debt. The law came into force in January 2020 and helped the debtors to settle their financial obligations through a court-appointed expert.

“The introduction of the new insolvency law is a groundbreaking legislative for development in the UAE as no prior provisions existed under the regulations protecting people in financial indebtedness against legal prosecution.

The new law has increased transparency in civil debts and promote financial security.

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