The Central Bank proposed to increase insurance amounts on credit insurance of life and health
The Central Bank has developed new rules for calculating the insurance amount for life and health insurance of borrowers. They suggest payments for insurance cases not only of debt under a consumer loan agreement, but also an additional amount calculated by a specific formula. For insurance companies, this threatens the rise in the cost of the product, and in order to compensate for the costs, they can increase prices or begin to reduce commissions to banks.
The Central Bank proposes to establish requirements for the amount of insurance amounts in credit insurance of life and health of borrowers, follows from the amendments published on April 14 in the Bank of Russia indication of May 17, 2022 No. 6139-U “On the minimum (standard) requirements for the conditions and the procedure for the implementation of voluntary life and health of the borrower under the consumer loan agreement (loan) …”. Thus, the additional insurance amount by the risks of death or the receipt of disability of the I and II group, including as a result of the disease, will be calculated as the work of the total insurance premium under the insurance and coefficient agreement, which depends on the age and gender of the insured. For example, by the risk of death for men and women aged 18-30 years, the coefficient is set, respectively, at the amount of 590 and 2980, at the age of 40-50 years – 200 and 630, at the age of 10 and 20. In terms of risk of disability, the coefficient will be from 1050 to 40 for men and from 1390 to 50 for women.
Earlier, the amount of the insurance amount was equal to the principal amount of the debt under the consumer loan agreement.
As the Central Bank explains, the emergence of new requirements is associated with a low level of payments for insurance products offered by insurers as ensuring the fulfillment of obligations under a loan agreement. It does not exceed 10%, which is significantly lower than the level of payments for other types of voluntary insurance, the regulator said.
For customers of insurers, a new measure is important, experts are sure. Clients can expect an increase in security due to more adequate insurance amounts, says Nikita Evseenko, director of the Revata Insurance Department, the director of the Revsoft Department. In the case of the initiative, average payments in the framework of the implementation of the insurance case for life and health insurance of borrowers can grow 1.3–2.5 times, evaluated by independent expert Andrei Barhota.
Insurers are still evaluating the influence of new measures. However, the interlocutor “Kommersant” in the insurance market draws attention to the fact that “after similar changes in regulation in relation to investment life insurance, products that fall under this regulation (with a bonus of up to 1.5 million rubles) have practically disappeared from the shelves.” At the same time, according to him, in indication No. 6139-U “there are no restrictions on the regulation by amount, and, accordingly, the changes will affect the entire credit life insurance.”
In general, this leads to a rise in the cost of a product for insurers. According to the partner B1 Tatyana Samsonova, increasing the limits of the insurance coating means the need to increase the cost of insurance services. “Some will probably take on the risks of worsening product profitability due to the growth of potential payments. Others, presumably, will increase insurance premiums to compensate for increased obligations, ”says Mr. Evseenko.
In order to smooth out a negative impact, insurance companies can be divided into insurance risks, reducing aviation expenses, the proportion of the separation of the insurance premium between the bank and the insurer may also change, Andrei Barhota believes.
“In particular, this can be achieved either by increasing the cost of the policy for the end consumer, or by redistributing flows between the bank-agent and the insurer in favor of the latter without the effect for the total premium under the contract,” Tatyana Samsonova said. However, in the latter case, “this will lead to a reduction in commission income” of banks and the need to look for ways to compensate them, the expert notes.
A historically significant part of the insurance premium under the life and health of the borrower under the consumer loan agreement went to pay for the bank’s commission for the conclusion of the contract. At the same time, the amount of the bank’s remuneration “could be up to 90% of the total premium paid by the insured, respectively, the amount of the bonus that the insurer remained to ensure insurance protection was small,” said Mrs. Samsonova.
