Borrowers’ life and health insurance contracts will become more transparent

The Bank of Russia has established standard requirements for a borrower insurance contract, which is concluded when issuing a consumer or mortgage loan.

The innovation is aimed at standardizing the insurance contract, minimizing the number of exceptions that serve as a reason for the refusal of the insurance company in payments, as well as simplifying the procedure for indemnification for insured events.

“Insurance coverage under a life and health insurance policy for a consumer loan borrower and for a mortgage will have to meet the minimum standard requirements, and a person will receive information about insurance conditions in an accessible form – in a key information document (KID),” the Central Bank said in a statement.

Relevant indication The Bank of Russia comes into force on October 1, 2022. Except for one point that regulates the conditions for terminating the insurance contract in case of full early repayment of the loan. It will come into effect from April 2023.

Until now, insurance organizations affiliated with banks have drawn up contracts in such a way that it is very problematic to receive payment on them. Firstly, it was required to provide the insurance organization with a pile of documents, and secondly, the list of exceptions for insured events sometimes took several pages. And it was difficult to understand where, in fact, to apply from the contract. This will not happen from October 1st. The contracts will clearly spell out how, where and when to submit documents for obtaining insurance, how, within what time frame and under what conditions the contract can be terminated, and the list of exceptions will be kept to a minimum.

“KID in a simple and understandable form will give the borrower information about insurance coverage, grounds for refusing to pay, the amount of the premium refund in case of early cancellation of insurance, and this will allow the consumer to make an informed decision on purchasing the policy,” the Central Bank specified.

The innovation, according to the regulator, will reduce the percentage of insurance refusals after receiving a loan. By the way, the “cooling time”, during which the bank’s client can refuse insurance without damage, has not changed and is 14 days from the date of conclusion of the contract.

Alena Bodrienko.

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