The Government of Dubai has made it mandatory for firms hiring professionals such as lawyers and legal consultants to have a “Professional Indemnity” insurance policy in order to practice in the emirate, Emirates Business has learnt.
Until now professionals such as doctors, engineers, architects, stock brokers and insurance brokers had been required to have an insurance cover in case they were sued.
Professional indemnity insurance will now include lawyers as well – a first in Dubai for the legal fraternity. This insurance is going to make the services of these professionals costlier, experts believe. As per a decree by the Ruler’s Court in Dubai, all the above will not have their licences renewed or be able to practise in the emirate unless they are covered under a professional indemnity policy.
However, national insurance firms in the UAE do not have such a policy in their product portfolio and customers will be forced to buy them from foreign insurance firms, such as those operating out of the UK, and at higher premiums.
Khaleel Saeed, Director-General of United Insurance Company in Dubai, told Emirates Business that the government realised the importance of professional indemnity insurance for certain groups of professions and made them mandatory to protect these professions. “Earlier, only the big and famous firms and hospitals used to come to us for professional indemnity insurance for their employees. However, this year we have seen an increase in the number of medium- and small-sized companies who are applying to get the cover,” Saeed said, adding that now it was compulsory.
“This is good news for these professionals. If they end up in any legal disputes, then the insurance cover will help the bodies hiring them to pay the claims. However, this policy will also increase the overhead costs of establishments that employ these professionals. To overcome this, they are going to have to increase the prices,” said Saeed.
As per the new requirements, law firms must obtain insurance cover for each lawyer working with them, of not less than Dh20 million per annum. “Many law firms have approached us to get professional indemnity insurance for their lawyers and legal consultants. The insurance coverage per lawyer is Dh20m and for this, we charge a premium that starts from Dh100,000. This is a bit harsh on small- and medium-sized firms, especially the ones who do not make such returns,” said Saeed. He added that many companies complained this new requirement has increased their costs, and they were going to increase the prices of their services to compensate. “Currently, the insurance companies here do not have professional indemnity insurance policies. We are getting them through a re-insurance system with insurance companies abroad,” Saeed revealed.
He added that a first-of-its-type professional indemnity insurance was imposed by Dubai Municipality on architecture firms about a year ago.
“This was made mandatory by Dubai Municipality in order to obtain or renew licences to start any project. If there were any mistakes in the designing of towers or projects or in supervising the work, or the tower was not up to the standard, then the engineers would be covered by this policy to pay compensations in case of a legal dispute.”
Doctors already have to have this insurance. “Earlier this year, Dubai’s Department of Health and Medical Services also made it mandatory for hospitals and clinics to have professional indemnity coverage for their doctors. If they are found guilty of any medical malpractice, the doctors and hospitals would pay the patients from this policy. This is very helpful when doctors do not have the money to pay for the claims,” Saeed explained.
He added: “Another category is insurance brokers. For example, if insurance brokers did not write down the conditions required from the clients clearly in the insurance policy and this leads the client to make a loss or not get the required coverage, then they are going to be covered by this insurance policy and be compensated.”
The premium for each category was decided depending on risk involved, as well as the experience of the professionals, said Saeed.
Policy limit ‘too high’
MA, a lawyer and owner of a law firm in the emirate, said the minimum policy limit of Dh20m for each lawyer or legal consultants was too high.
“Officials must consider lowering it or making it in accordance with the level of income obtained by the lawyers. With the limit of coverage at Dh20m we are paying at least Dh100,000 as premium per lawyer or legal consultants.
“This is too much, especially when we are not making so much money on cases because our company is not a big firm,” he said.
He pointed out that such policies are required in other countries, but are based on more rational considerations there.
“For example, in the United States, the lawyers pay between $1,000 to $100,000 as premium based on the income they make per annum, and this, I believe, is reasonable,” he said.
He added that this new requirement has increased the running costs of his firm considerably.
“This made me and many other law firms increase the rates of our services. In the end, this is going to harm those benefiting from our services and will add to the cost of living here.”
Professional indemnity insurance coverage amounts for different professions:
- Insurance brokers: Dh1.5m
- Stock brokers: Dh2m to Dh3m
- Lawyers and legal consultants: Dh20m
- Hospitals: Dh2m per case and up to Dh10m for all the cases per annum
- Clinics: Dh500,000 per annum for each case
- Architects and engineers: Up to Dh5m depending on the size of the project
Bad news for clinics
Dr TP Ray, Managing Director of Dr Ray’s Medical Centre in Dubai, said the new decision does not make sense, especially for non-surgeons and doctors who are not involved in any surgical work.
“Financially, it doesn’t make sense, as we don’t do any surgical operations. This insurance should be required for surgeons.”
He added that this is also increasing their costs of operation, and may eventually lead small clinics to close down.