Basic standards approved for consumer rights protection in insurance and insurer operations in financial market

These basic standards come as a result of almost one year’s coordinated efforts by the Bank of Russia and the All-Russian Insurance Association (ARIA), a self-regulatory organisation in the financial market uniting insurance companies. The association developed the two standards in line with the regulator’s requirements. Basic standards are binding upon all insurers.

The basic standard for operations sets out requirements for execution of an insurance contract (including calculation of the consumer’s property interest), payment of insurance premium and in-kind damages, the timeframe and procedure for payment of insurance benefit, protection of information the insurance company obtains in the course of its operations and the terms of insurance company and agent interactions.

The document also sets forth:

• the insurer's obligation to inform the policy holder in cases a regular insurance contribution is late or only partially paid, as well as the consequences for such non-compliance — in the manner agreed with the insurance company on the date of signing of the insurance contract
• a clause of the insurance company's responsibility for improper arrangements for and late payment of in-kind damages, alongside the option of lodging a complaint about the quality of service (in cases the repair contractor was selected by the insurance company)
• a clause stipulating that the loss of documents on insurance compensation does not entitle the insurance company, with few exceptions, to demand from the policy holder their resubmission
• the obligation to specify education and professional training requirements for insurance agents (employees of the insurance agent as a legal entity interacting with policy holders), as well as the responsibility to hold appropriate staff briefing (training).

In turn, the basic standard for the protection of consumers’ (both entities’ and individuals’) rights and interests sets forth essential requirements for the procedure whereby a customer and an insurer should execute an investment life insurance (ILI) contract. In particular, the insurance company is obliged to provide to the consumer further information on ILI contract specifics, risks related to this contract, notice of non-guaranteed income under this contract and the method for calculating the redemption amount. Additionally, in the cooling-off period — when the customer has the right to opt out and receive the money back — the insurance company is obliged to contact the customer and secure a confirmation that he / she understands the terms of the insurance contract (including limitations relating to early opt-out). These requirements of the standard will also cover insurance companies’ agents providing insurance products to customers including sale of insurance products through credit organisations.

Providing information to the consumer is a key component of the consumer right protection standard in insurance. The standard also assumes that legitimacy, reliability and integrity of the communicated data should form the principles of insurance company-distributed advertising information, preventing the abuse of consumer trust or insufficient financial literacy.

Both basic standards will become binding 270 days after the date of their publication on the Bank of Russia website. Insurance companies have until this deadline to bring their operations into alignment with the standards’ requirements, specifically, to ensure appropriate operations of the official site and to organise the operations of their front offices, approve corporate documents governing the procedure for information storage, staff training, analysis of complaints, and also to include in insurance contracts a clause whereby the insurance agent is obliged to comply with the standards’ requirements.

Basic standard clauses apply for relations of insurance companies with consumers of insurance services which arise from an insurance contract signed before the application date of the standards in the part consistent with the terms of these contracts.

Once applied, the basic standards will foster improved quality of financial services provided by insurance companies and will boost the transparency of their operations.