The value of preparing for regulations

If 16-year MDRT member Sanjay Tolani, Ph.D., MBA, of Dubai, United Arab Emirates, knew a near-bankruptcy was coming his way, he would have put different procedures in place to adjust for the clawbacks allowable in the UAE. The clawbacks weren’t much of a problem for him, however, until 2010, when the global economic crisis descended on the UAE. When that happened, approximately 70 of Tolani’s biggest clients let their policies lapse as they fled the country. Keys were found in almost 3,700 luxury cars abandoned in haste at the airport. In the UAE, if you go bankrupt, you go to jail.

For Tolani, missing clients and lapsed policies meant he owed insurance companies a substantial sum of money. The insurance companies enacted clawback policies to get back the commissions they had already paid to Tolani and other advisors in his company.

Staying informed

Had Tolani’s business been located in India or another country that doesn’t have clawbacks, he would not have been scrambling to make the payments to the insurance companies. Instead he was in the same position as his clients and others in UAE, facing the possibility of a bankruptcy, which can mean leaving the country.

He weathered the crisis and came out wiser for it. Tolani knows last decade’s Great Recession will not be the last financial crisis or market fluctuation. He changed his processes so enough money is held in reserves to cover clawbacks. He also knows there are myriad other regulations, which can force advisors out of business if they are not prepared. These regulations include education requirements or commission bans, and they can take years to prepare for.

Read more about regulations around the world to see what may be coming to your way in “Predicting the future of regulations,” in the November/December issue of Round the Table.

By Antoinette Tuscano, MDRT Content Specialist