Daily life brings risks, such as having an accident while driving or getting a severe illness like cancer. The word ‘insurance’ refers to taking protective measures against risks to be prepared for unforeseen situations. Firstly, insurance is a contract between two parties: the insured will pay an amount of money to the insurer with the primary objective that if a situation listed in the insurance policy occurs, the insurer will respond. The contract is called an insurance policy, which contains terms and conditions between two parties, their obligations, and rights or the rights of the beneficiary of the insurance.
In UAE, the subject of insurance is regulated by Federal Law Number 6 of 2007 concerning the Establishment of the Insurance Authority and Regulation of Insurance operation (the UAE Insurance Law) that replaced the Federal Law Number 9 of 1984 concerning Insurance Companies and Agents (the Previous Insurance Law). According to article 2, the Insurance Law applies to companies and intermediaries registered and licensed in the UAE, except those insurance providers registered and licensed in the Dubai International Financial Centre (DIFC). On the other hand, the authority in charge of regulating and supervising the insurance sector in UAE is the Insurance Authority, with the principal role of ensuring suitable environments to develop the insurance industry to secure lives, properties, and liabilities against risks. Article 4 of the UAE Insurance Law state the direct insurance operations are divided into three types:
The UAE Federal Law Number 3 of 2018 modified Federal Law Number 6 of 2007. For example, with this new law, insurers must handle claims following the applicable law, policy provisions, and follow procedures like clarifying any declinature of all or a part of a claim with reasons in writing. The essential insurance classes in the UAE are medical and motor insurance. In medical insurance, the provider changes depending on the emirates. For example, in Abu Dhabi, the Health Insurance providers must be registered with the Health Authority Abu Dhabi (HAAD). Otherwise, in Dubai, it is with the Dubai Health Authority (DHA). To know more about legalities behind Insurance contracts in UAE, the best option would be to talk to an expert at Fotis International Law firm.
As we said before, the law of medical insurance changes depending on the emirates. In the case of Dubai, law No 11 of 2013 concerning health insurance in the Emirate of Dubai states that all residents must have health insurance. Employers are obligated to provide medical cover to their employees, and the employer must not deduct the employee’s salary to cover the cost of the insurance (Article 2). Nevertheless, In Dubai, employers do not have the legal obligation to give their employees’ dependents insurance. In comparison to Abu Dhabi, employers are legally obligated to provide medical cover to their employees and their dependents, but it is only required to pay 50 % of the dependents’ cost. The health insurance policy shall be issued by the coverage provider and include the following data: scope of health benefits, the financial ceiling thereof and the coverage period, health service provider network, coverage amount, mechanism of submitting complaints, among others. The validity of the health insurance policy shall expire by the end of the coverage period indicated, by the decease of the beneficiary or by the termination of his relationship with the entity responsible for his coverage (Article 16 and 17- law No 11 of 2013). If the employer does not give the employee medical insurance, fines of AED 500 will be issued for each month of non-compliance. If employees whose salary is AED 4,000 or below, the employer must purchase a plan that meets the Essential Benefits Plan Minimum level of cover (EBP). Finally, for Emiratis, the government covers their medical insurance; for instance, in Abu Dhabi they are covered under the Thiqa Scheme.
According to the Road and Transport Authority (RTA), all vehicles must have car insurance. There are two types of motor insurance:
If the person does not have insurance for the car, the fine will be AED 500 plus the vehicle’s confiscation per seven (7) days.
‘Takaful’ means solidarity. It is a type of Islamic insurance based on Sharia Law where all the members contribute money in a pool system to guarantee each other against loss or damage. The Resolution No. 4 of 2010 concerning Takaful insurance (The Takaful Regulation) regulates the takaful operators. According to the Takaful regulation, three categories of risks cover for this insurance (article 4):
In the Takaful structure, the most common models are the mudaraba and wakala. The mudaraba is where one side contributes the money, and the other manages it, and the wakala makes reference to one side mandates the other to perform a specific job on his behalf. The takaful market is growing, and he is expecting to grow to $40 billion by 2023. In UAE, we can find takaful companies such as Abu Dhabi National Takaful, Takaful Emarat, Noor Takaful, etc. In conclusion, both insurances (takaful and conventional insurance) have the same purpose: to cover in case of risk, but in conventional insurance, the policy covers one person. In takaful insurance, there is a fund that could help those experiencing the unfortunate situation. Also, conventional insurance is based on commercial factors only, takaful insurance is based on cooperation.