CMA Organizes an Introductory Workshop on the Unified Credit Life Insurance Policy

Al Harrasi:  disclosure and transparency are considered key pillars for specifying the size of the insurance risk and setting the standards of underwriting to limit disputes among the parties involved.

The Capital Market Authority (CMA) organized an Introductory Workshop on the Unified Credit Life Insurance Policy issued by decision no. (4/2024) with the parties concerned with the implementation of its provisions: representatives of insurance companies, banks and other related parties.   The workshop aimed at clarifying the mechanisms of implementing the policy’s provisions to achieve the best practices based on awareness, understanding and full agreement of all the parties of this contractual relationship. Moreover, the workshop shed light on queries related to the policy and ensured the partnership and integration between the regulator and the parties obliged to implement the policy to achieve the intended regulatory objectives that provide the required protection for policyholders and other related parties.

Ahmed Salim Al Harrasi, Director General of Market Prudentials and Development Sector, began the opening speech by emphasizing that the issuance of this policy represents an advanced step in regulating the processes of bank financing to ensure that the rights of policyholders and other related parties are protected.  Also, it promotes the concept of social security through providing protection for borrowers and their heirs within a specific legal framework.

During his speech, Al Harrasi clarified that the policy contains clear terms and focuses on specifying the insurance coverage, basic benefits and exclusions.  Additionally, it enhances the principle of transparency and disclosure regarding the health condition of the borrower.  The last simplifies specifying the size of the insurance risks and setting the standards of underwriting; which indeed limits disputes among the parties involved: banks, borrowers and insurers.  In case the insured presents false details or material information, he or she forfeits their right of claim for compensation from the insurer, so the last can reject the claim.  Also, and based on the principle of good faith, the policy includes a term stipulating that the insurance company may not reject the claim on the pretext of not disclosing any medical condition after four (4) years from the effective date of the policy, except the cases of intentional forgery of the papers and disabilities resulting from previously diagnosed physical impairments or diseases.

During the workshop, many provisions and terms were clarified.  First, determining the method of indemnity, the policy stipulates that in the event of death, the outstanding loan amount must be repaid from the date of the death as established by the official authorities. The indemnity in the case of total permanent disability will be determined after the period of full recovery estimated at 12 months from the date of the accident or the date of referral to the medical committee, whichever comes first without any improvement in the condition or according to the period specified by the competent medical committee.  Second, the basis for calculating the insurance premium in group insurance agreements between banks and insurance companies is based on a single premium, hence, the insurance period corresponds to the loan repayment period, which leads to protecting policyholders from any increase in insurance premiums after the effective date of the loan. The policy also provides an advantage to policyholders in obtaining various options at reasonable competitive prices, as the policyholder has the right to choose the appropriate insurance company without having to commit to the insurance option offered by the creditor.

The workshop also focused on clarifying the policy’s exclusions that took into account the long term of such policies.  First, concealing previously existing and diagnosed diseases before the policy’s effective date and were the main and direct cause of death or disability.  Second, the intentional attempt by the insured to obtain the benefits of coverage through forging documents.  Third, death or disability cases resulting from Adventures, some dangerous sports and Exposing the body to radiation unless it was a part of treatment plan supported by medical reports certified by the Ministry of Health.