Share life insurance can partially replace investment and savings life insurance policies

In a year, a new investment product should appear on the insurance market – shared life insurance (DSI). The State Duma adopted the corresponding bill in the second reading. The funds will be invested in shares of investment funds on behalf of the policyholder. According to experts, DSL can partially replace existing investment life insurance (ILI) and endowment life insurance (USL) policies. However, the risks of unsuccessful investments remain for policyholders, and the proposed “cooling-off period” may be too short for correct decision-making.

The bill on private life insurance, adopted on December 14 by the State Duma in the second reading, essentially brings to the market a new investment product similar to the international unit-linked one. The DSG agreement combines insurance protection and investment.

The policyholder independently selects units of investment funds (UIFs) in which to invest, forms an investment portfolio, changes its structure, giving appropriate instructions to the insurance company, which distinguishes it from investment products in the life insurance market – investment and savings life insurance policies (ISZH, NSZH) . At the same time, to carry out shared life insurance, the insurer needs either a license to operate investment funds, or an agreement with a management company (see “Kommersant” dated October 20, 2022). The new law is planned to come into force in 2025.

A new product “with a more clearly separated investment component” will stimulate market growth, but will also require greater transparency during sales so that “the client understands all the risks,” believes Vladimir Shur, director of Kept’s practice for working with financial sector companies.

According to Alexey Yanin, Managing Director for Ratings of Insurance and Investment Companies at Expert RA, the potential life insurance market is comparable to the current volumes of private life insurance and life insurance, and it will “not only complement, but also partially replace current types of insurance.” In addition, such insurance is “reserves of life insurers, which are long-term money,” notes the All-Russian Union of Insurers (VSU).

According to insurers, the market is ready for the launch of DSG. The bill has been discussed for several years, and similar products have been working abroad for decades, explains the BCC. The SberLife Insurance product line includes similar instruments, and the sales volume for the year amounted to 65 billion rubles, says the company’s general director Igor Kobzar. The companies “Capital Life Insurance” and “AlfaStrakhovanie” are also “ready to launch such products.”

In 2024, insurers, together with the Bank of Russia, will develop regulatory documents, prepare infrastructure for the investment part of the insurance policy, and train partners in sales, says Alexey Artamonov, director of the department for interaction with government authorities at AlfaStrakhovanie.

However, DSG also carries risks for policyholders, experts say.

The main problem is the threat of unsuccessfully investing money, since this is often decided by the policyholder himself, explains Diana Sork, a lawyer at the International Confederation of Consumer Societies. Investing part of the funds in riskier instruments cannot guarantee 100% success; moreover, for the majority it still remains “an imposed service with unclear prospects,” notes Ilya Zharsky, managing partner of the Veta Expert Group.

In this regard, the bill introduced a “cooling-off period”, according to which the policyholder can refuse the insurance policy with a refund if, within 14 days from the date of payment of the insurance premium, the insurer has not purchased certain investment shares at the client’s direction. This practice is now used in most financial decisions, notes Mikhail Kunin, head of the personal insurance department at Nobilis. However, Diana Sork believes that the norm does not always protect consumers, since “not all of them can assess the riskiness of such investments in such a short period of time.”

Yulia Poslavskaya