Bank of Russia sets minimum requirements for ULLI
The Bank of Russia has established the procedure for selling unit-linked life insurance (ULLI) policies and informing customers about the specifics of this instrument. The relevant Ordinance will become effective on 1 January 2025, when insurance companies will be able to offer the new product. It combines traditional life insurance and investment in unit investment funds (UIFs).
When signing ULLI contracts, insurers should provide their customers with a key information document describing the conditions and risks of this product. Among other things, the document must specify the percentages of money allocated to life insurance and to investment, permitted transactions with the units of UIFs, and also commissions charged by insurers and the amount of such commissions. On the day following the signing of the contract, the insurer must remind the customer that the ULLI contract is not a bank deposit and that the customer may cancel his/her policy during the cooling-off period and get the money back.
If the customer refuses to accept the service within four days, he/she will be refunded in full and receive both the insurance and investment parts of the premium paid, even if the value of purchased units has decreased. If the contract is terminated within 30 days, the customer may receive the insurance premium and money to redeem the units at the current value.
The Bank of Russia’s document also determines the specifics of interaction when making investment transactions. In particular, the customer will be able to withdraw from the contract and return the insurance premium, if six or more exchange or redemption transactions with units are made during the year. This requirement is set to prevent the insurer from changing the investment strategy in order to get additional commissions from the customer.
Moreover, the regulator has limited the list of exemptions from insurance coverage. Insurers may be exempted from insurance payments only in case of events related to alcohol, drug or toxic poisoning of insured persons. Companies must pay compensations for insured events within 30 days.