Bank of Russia outlines requirements for insurance policies sold as addition to consumer loans

‘Credit insurance of borrowers’ life and health ranks second in premiums after investment and endowment life insurance. However, payouts in this type of insurance are extremely low with a high share of refusals. This often comes as a result of abuse, both when the insurance product is sold and when the contract is executed. The Bank of Russia’s proposed measures are aimed at combating the unfair practices market participants are widely applying’, said Vladimir Chistyukhin, Deputy Governor of the Bank of Russia.

The draft regulation envisages a minimum set of insured events (death, and group 1 and 2 disability), which insurers could expand to include, for example, job loss. Insurers may only expand the standard list of exceptions from insurance coverage provided for by civil law by adding cases where an insured person dies under the influence of alcohol or when a customer misinforms an insurer about their socially important diseases.

The insurance policy would be effective immediately after the insurance premium has been paid, and the amount of insurance payout should at least equal the loan amount.

There are plans to standardise procedures whereby insurance compensation is received. Insurance compensation would be payable within 30 days. Payments would be made against a closed list of documents (specified in the draft ordinance) supporting the occurrence of an insured event.

Also, the insurer would be obliged to provide a key description of the insurance product, in the form of a brief information document. This would help consumers confirm the need for the policy.

Consumers would find it convenient that all applications to the insurer could be submitted through the bank issuing the consumer loan.