Hard selling of extra services and goods masquerading as insurance is unacceptable
There are cases when insurers’ agents (banks, car dealers, and other intermediaries) offer extra products and services, which are not related to insurance (e.g. legal ones), to consumers when selling insurance policies.
Moreover, additional services are much more expensive than an insurance policy. However, their purchase is masqueraded as the signing of an insurance contract and most often paid for in a lump sum. Consequently, if the loan related to the insurance policy is repaid ahead of schedule, the customer is only able to return a small amount for the policy. Such unfair practices were revealed by the Bank of Russia in the course of conduct supervision.
Another problem is that agents fail to disclose sufficient information to individuals. For instance, people with disabilities or chronic diseases are offered insurance products, the terms of which are not applicable to such groups of consumers. Agents do not inform customers of exceptions from insurance coverage. As a result, a person signs a contract that, by definition, cannot be fulfilled.
The Bank of Russia also detected some cases where agents convinced customers that the purchase of insurance policies would help receive a loan on more favourable terms, and a part of the insurance premium could be refunded if the loan was repaid ahead of schedule, as envisaged by legislative amendments effective since 2020. However, they actually sold simultaneously two policies with different prices to a person, with one of the two being totally irrelevant to the loan contract parameters. In the case of early repayment of the loan, the customer received a partial refund under only one, the cheaper, insurance contract.
The Bank of Russia applied supervisory measures in relation to the revealed misconduct and advised the insurers that they should improve their business models.