Bank of Russia to establish requirements for investment insurance products
The regulator intends to set minimal requirements for insurance companies offering investment life insurance (ILI) and endowment life insurance (ELI) products. The initiative is aimed at eliminating the malpractices of misleading consumers as to the specifics of these products.
Insurance providers market ILI products as policies with a risk (in the event of death) and investment component. It is suggested that a risk component be strengthened to prevent consumers from buying investment products in the guise of insurance policies. Insurers will be obliged to guarantee in insurance rules that insurance coverage under an ILI policy is effective from the first payment date, and in the event of the death of the insured individual, the insurance payout must at least be twice the insurance premium).
The regulator also deems it necessary to ensure security of investments and imputed returns under any ILI contract and a short-term ELI contract (lasting less than seven years). On contract expiry the customer receives income in addition to the repayment of an insurance premium.
Protection of investment will also extend to cases of consumers opting out of an investment insurance policies. Until the third payment has been made, the customer is entitled to a 100% refund of payments.
Previously, the Bank of Russia has recommended that insurance companies and their agents limit sales of several insurance products with an investment component given the high investment risks and complexity these instruments carry for consumers without financial expertise.