Insurance is removed from the body of the loan – Newspaper Kommersant No. 4 (7449) dated 01/12/2023

Consumer advocates are proposing to ban banks from including insurance in the body of a consumer loan without an alternative payment method, as credit organizations continue to impose them. This follows from the proposals sent to the Central Bank. According to experts, the initiative will make lending more transparent, but there is a risk of higher interest rates on loans and a decrease in the level of approvals.

The Central Bank’s fight against unfair practices of imposing insurance services by banks has not yet given the proper result, they continue to sell insurance to consumers, including them in the body of the loan, follows from a study by the International Confederation of Consumer Societies (ConfOP, the study was conducted in October-December 2022 using the “secret buyer”). This practice is observed even among the largest players – in Sberbank, Gazprombank and Rosselkhozbank. These banks did not respond to Kommersant’s request.

According to the ONF, in 2022 the number of applications for the imposition of life insurance by banks increased by 10% compared to a year earlier, and for health risk and accident insurance – by almost 30%. The Financial Ombudsman’s Service added that in 2022 the number of applications regarding the imposition of insurance services in consumer lending increased by almost 4 times compared to 2021.

At the same time, banks, including insurance in the body of the loan, formally act legally. According to Yury Fedyukin, managing partner of Enterprise Legal Solutions, such insurance is a condition for obtaining a loan, and the client signs this condition in the contract; another point is that banks are playing the insurance purchase in their favor, and consumers do not know their rights. At the same time, the borrower acquires a product that is useless for himself on credit, Dmitry Yanin, chairman of the board of ConfOP, points out. It follows from the ConfOP study that the insurance fee can be up to 18% of the loan amount and reach hundreds of thousands of rubles, and the rate in case of cancellation of insurance can increase by 5–20%. According to Sotheby’s partner Varvara Knutova, an acute problem also arises when a consumer repays a loan ahead of schedule, and it can be very difficult to return an insurance overpayment from an insurance company controlled by a bank.

In this regard, ConfOP propose to prohibit banks from not providing consumers with a choice of how to purchase an insurance product using their own or credit funds. The corresponding letter was sent to the Central Bank on January 11. The Central Bank reported that the letter was received and will be studied. Meanwhile, the regulator recalled that the imposition of insurance in general is unacceptable and the borrower has the right to insure his life and health separately from the conclusion of a loan agreement or a loan agreement. This choice should be transparent, understandable and conscious for the consumer, they assured there.

However, this is still just a theory. “Giving consumers the right to choose how to purchase an insurance product – using their own or credit funds – is a very important point. In the absence of such a right, the consumer is in obviously unfavorable conditions,” explains Olga Basova, senior director for ratings of insurance and investment companies at Expert RA. NRA Senior Managing Director Irina Melnikova adds that the possibility of paying for an insurance product using its own funds creates an opportunity for the borrower to know exactly the price of insurance coverage, which ensures the transparency of the product.

However, experts pay attention to the risks of such regulation. For example, Olga Zhidkova, head of banking services analysis department at Banki.ru, believes that the ban on not providing the consumer with a choice of payment method for insurance can lead to an increase in the cost of loans or a decrease in the approval rate on such conditions. If insurance is included in the body of the loan, the bank charges interest on the entire amount, including insurance, and if insurance is paid at its own expense, the bank will receive less income, the expert explains.

Julia Poslavskaya, Olga Sherunkova