Refund for forced insurance
This is envisaged by the Bank of Russia Ordinance ‘On the Minimum (Standard) Requirements to the Conditions and Procedure for Individual Types of Voluntary Insurance.’ According to the Ordinance, a person who rejects an agreement shall have the right to recover the insurance premium paid.
The ‘cooling period’ will be at least five days (or it can be longer at the insurer’s discretion). It starts from the day a voluntary insurance agreement is signed disregarding the day when the insurance premium is paid.
In the event a policy is rejected within the ‘cooling period’, an insurance company shall pay a full refund provided an insurance agreement is not effective yet. If the insurance agreement has already come into force, the insurer shall have the right to retain a part of the premium pro rata the number of days the agreement has been in force.
The new rules will involve almost every popular type of insurance, including life insurance, accident insurance, motor own damage insurance, motor third party liability insurance, third party boat insurance, voluntary medical insurance, third party civil liability insurance, and financial risk insurance.
‘The need to introduce the ‘cooling period’ stems from the negative practice on the insurance market to force voluntary insurance agreements upon individuals in which they are not interested, including the situations when such individuals are provided with insurance or banking services’, - Igor Zhuk, in charge of the Insurance Market Department, says.
The very problem of forcing insurance products emerged full blown a few years ago when consumer lending gained its momentum. A case was quite common when people while taking a loan did not have any slightest idea that they were receiving a simultaneous insurance service. It was not easy at all to understand what was going on with a bunch of documents before their eyes and realise the insurance cost was added to the loan amount. In other cases, acquisition of insurance services was a must to sign a loan agreement.
The no less acute situation was seen on the market of the compulsory motor third party liability insurance, especially in the year 2014 and 2015 H1, when car owners in many Russian regions could acquire OSAGO policies only with the accident insurance, or property insurance, etc., as an additional burden.
The Bank of Russia efforts to stabilise the OSAGO market and to protect consumers’ rights somehow released the tension. For example, according to the Service for Protection of Financial Services Consumers and Minority Shareholders, in 2015 Q3 the number of claims on the forced insurance services at acquiring OSAGO policies dropped by 67% against 2015 Q2 statistics. However, this rate is still relatively high.
Our legislation prohibits any forcing of other services when you need to get a specific service. Moreover, any forcing of additional services when signing OSAGO agreements results in administrative responsibility, although the very fact of forcing is sometimes difficult to prove.
Igor Zhuk believes the introduction of the ‘cooling period’ will allow the consumers to abandon a forced or non-lucrative insurance service without making any special claims or launching special administrative or legal proceedings.
Currently, the Bank of Russia Ordinance is being registered by the Ministry of Justice. When it becomes effective, insurance companies will have 90 days to bring their activities on new agreements in line with the Bank of Russia Ordinance.