The Insurance Third Party Administrators have become vital section of insurance industry and changing the facade of insurance sector all around the world. Third party administrators are neither insurance providers nor insured. They are the service providers bridging the gap between the two and serves the insurer and insured during processing of applications and claims, adjudication, and negotiation of claims including keeping records or maintenance of plan. The sector needs to be regulated as being in-severable to the process during this era. This article will also briefly accentuate the insurance law under DIFC regime.
Instructions for Regulation of HITPA
Board Resolution No. 9 of 2011 Concerning the Instructions for Licensing Health Insurance Third Party Administrators and Regulation and Control of their Business was passed pursuant to the provisions of Article 7 (9) of the Law, recommendations of the Director General of the IA and the approval of the IA board of directors. The resolution sets out several key terms requiring insurance companies to adopt and practice in operation of their business in the region, a brief overview of which is appended below:
i. Article 2 comprises of definitions which are consistent with the Law except for the ‘Register’ which means the “Register of Health Insurance Third Party Administrators at the IA. The revised definitions of Pertinent Authority and other important terms such as Beneficiary, Health insurance third party Administrator, Medical Service Providers, Excess, Fraud and Abuse are added.
ii. Article 3 states that health insurance third party administration may only be performed by a company specialized in this kind of business and registered in the register. Further, such companies need to adhere to regulations and instructions issued by the medical authorities of that Emirate.
iii. Article 4 provides scope of business and provides that the business of Health Insurance Third Party Administrators shall be limited to:
- Settlement of claims arising from health insurance.
- Payment of health insurance claims on behalf of the Insurers.
- Management of health insurance programs approved by the Insurers.
- Conclusion of agreements with medical service providers on behalf of the Insurers.
- Development of health insurance programs provided that they may not market or sell them.
- Establishment of a network for service providers.
- Provision of consultancy services in underwriting (reports on the analysis of claim expenses and recommendations for effective underwriting policies.)
iv. Article 5 provides for ‘eligibility’ to operate as Health Insurance Third Party Administrators (HITPA):
a. Private or public joint stock company/LLC incorporated under the laws of UAE/ branch of foreign company and has been practicing the business for a period of not less than two years.
b. Obtain license from insurance authority in respect of present resolution in addition to license from competent authority in emirate.
c. Minimum paid up capital of UAE Dirham five million.
d. Objectives limited to the health insurance third party administration
e. Conclude an insurance policy covering professional liability risks, provided that the sum insured thereof may not be less than AED 3,000,000 (UAE Dirham Three Million) and the excess amount may not be more than AED 100,000 (UAE Dirham One Hundred Thousand).
f. Adhere to international standards in such practice
v. Article 6 provides for the limitation and restrains on activities of the HITPA:
1. Neither sell nor market the health insurance policies
2. HITPA not to possess or share in the capital or management of any medical facility or health insurers.
3. The TPA shall separate its accounts from the accounts of funds generated from its activities in the health insurance claims.
4. HITPA should not provide services to insurance companies not licensed to provide service in state.
Cabinet Resolution No. 42 of 2009 concerning Insurance Companies Minimum Capital Regulations was issued on 27 December 2009. This resolution applies to all companies, excluding companies operating in free zones in the State.
Article 3 states that the minimum capital of the company –‘the subscribed and paid up capital’ of a company may not be less than AED 100,000,000 (UAE Dirham One Hundred Million).
The subscribed and paid up capital of a reinsurers may not be less than AED 250,000,000 (UAE Dirham Two Hundred and Fifty Million).
Article 4 states that at least 75% (seventy five percent) of the capital of a company incorporated in the State must be owned by natural persons of the UAE or GCC nationals or by corporate persons wholly owned by citizens holding UAE or GCC nationality.
Pursuant to provisions of Article 6, if the company intends to increase the capital of the company it could be done under a decision of the IA based on an application submitted by the company. For the reduction of capital of the company same rule would follow. The board has discretion to approve or reject such reduction application in public interest. Article 7 lays responsibility on the companies to comply with the rules stated in this resolution within 3 years from the date of taking effect of the resolution.
Board of Directors Resolution No. 15 of 2013 is concerning Insurance Brokers concerning the regulation of the profession of insurance brokers sets out the requirements for obtaining and maintaining a brokerage license, including an obligation for a broker to maintain paid-up capital of AED3 million (for UAE companies) and AED10 million (for branches of brokers established in a Free Zone or branches of a foreign company). Further, insurance brokers are prohibited from dealing with insurance companies not licensed by the IA. Vide Circular No. (5) of 2014 issued on 16 January 2014, the Ministry of Economy Resolution No. (543) of 2006 was repealed.
The Health Insurance law number 11 of 2013 (the Health Insurance Law) came into effect on 1 January 2014 which makes health insurance cover mandatory in Emirate of Dubai including freezones. The companies with different number of employees were granted different deadlines. The employers failing to cover employees as required by law will incur fines ranging between AED 500 and AED 150,000.
The Standard notice number 2 of 2015 (SN 02/2015) pursuant to Health Insurance law was issued by the Dubai Health Authority in respect of Emirate of Dubai. The SN 02/2015 provides guidelines for minimum standards in respect of following:
1. Training and competence schemes.
2. Complaint handling procedure and complaint logs
3. Code of Conduct for Permitted Health Insurance Representatives (PHIRs)
4. Data protection and client personal data confidentiality policies.
The SN 02/2015 applies to all the health insurance intermediaries marketing within or into the Emirate of Dubai. The SN 02/2015 sought the submission of documents in respect of the above mentioned items by the intermediaries registered for the health Insurance intermediary permit (HIIP) since 1 December to receive “unconditional compliance” status from the “conditional compliance” status. The policy document submitted must meet the standards/guidelines stated in the SN 02/2015 to receive unconditional compliance status and sought the submission before 31 August 2015. This date was further extended till December 2015.
Dubai International Financial Center (DIFC):
Insurers and Reinsurers operating within DIFC have to obtain Dubai Financial Services Authority’s (DFSA) approval before they can carry out insurance business in DIFC.
In essence, DFSA regulated insurers are not authorized to under direct risk outside the DIFC for individuals or companies based in mainland UAE. The DFSA authorized firms are free to underwrite direct and indirect risks anywhere in the world. However, the authorized firms can act as reinsurers for mainland UAE indirect risks. Therefore, DIFC provides for a wholesale regime instead of a retail platform for insurance within the UAE mainland market. Rule 7 of Conduct of Business Rulebook.
The DSFA rule book Prudential – Insurance Business Module which applies more specifically to insurers. The rule book does not define insurance contract and is a guideline for insurers and reinsurers. It elaborates on management and control of risk, long term insurance business, capital adequacy, measurement of assets and liabilities of insurers, financial and other reportings by insurers, actuaries, consolidated supervision, insurers in run-off and other guidelines.
Although there is no general rule or market practice as to the content or form of reinsurance contracts issued by DFSA – authorized reinsurers, the terms of such insurance contract will generally dictate commercial arrangements agreed by and between the insurer and the insured including commercial terms, nature and terms of policy, conditions precedents and special conditions if any. The contract will also dictate the terms of dispute resolution before the DIFC court.
The DIFC Insurance Association has been incorporated as non-profit body in the DIFC on 29 March 2015. It comprises professional association of insurance entities at the DIFC.
The regulations are further expected in the sphere of minimum coverage provided by employers, prices of health insurance service products and premiums rates charges by the insurers.
Originally published on www.complinet.com Complinet Group Ltd (Thomson Reuters) by STA Law Firm