Bank of Russia establishes information disclosure requirements for the sale of life insurance policies

As of 1 April, insurers and their agents will be obliged to warn customers about the key risks linked to the insurance products they offer and the main conditions of the contract when selling life insurance policies. This has been laid out in a Bank of Russia ordinance, which has been registered with the Ministry of Justice of the Russian Federation.

In particular, insurance vendors will be obliged to inform customers about the procedure for calculating investment income, the lack of guarantees of receiving said income, and the procedure for returning funds upon termination of the insurance contract; as well as the fact that investments under a given insurance contract are not covered by the DIA guarantee system. Furthermore, the following information is also to be disclosed: which percentage of the funds put in by the customer will be invested, and which will be used to cover the expenses of insurer and pay commission to the intermediary.

“The main aim of the document is to make sure that insurance consumers clearly understand which product they are buying, and what its main features are,” said Philipp Gabunia, director of the Insurance Market Department of the Bank of Russia. “Currently, vendors tend not to disclose all the features of the products on offer, which leads to customers having excessive expectations. This problem is particularly pressing in terms of investment life insurance, which many people see as an alternative to bank deposits.”

Mandatory information disclosure is aimed at protecting the rights of insurance consumers and will help customers make appropriate choices about the investment tools that match their needs.