Half of the complaints to the Financial Ombudsman Service (FOS) concerning non-motor insurance are comprised of those in life insurance
In the period of May 28, 2019 to May 28, 2020, the FOS received 6,877 complaints related to this market segment (non-motor insurance), which is 7.5% of all complaints received during the period in question, as reported Chief Financial Ombudsman Yuri Voronin.
Since November 28, 2019, the out-of-court decision-making procedure by the FOS for all types of insurance, with the exception of compulsory medical insurance, has become mandatory. Earlier on, since June 1, 2019, the working procedure had only been valid for disputes under Compulsory Motor Liability insurance, Fully Comprehensive Automobile insurance and Voluntary Third Party Liability agreements.
According to Yuri Voronin, the FOS received 3,331 complaints concerning life insurance contracts in the period of November 28, 2019 to May 28, 2020, which is equivalent of 48.4% of the total number of complaints for non-motor types of insurance. Second in number are complaints against accident and illness insurance (1855, or 27% of complaints), and third in number are property insurance complaints (1,040, or 15.2% of complaints). “For half a year, as we have been working with non-motorized types of insurance complaints, disputes related to life insurance and accident and illness insurance have had the highest monthly dynamics of incoming complaints. Thus, for example, in January we only received 322 complaints against life insurance, 697 in February, 888 in March, 502 in April, when there was a general decrease in the number of complaints, and 765 in May,” notes Yuri Voronin.
Compensation of the insurance premium upon the termination of the insurance contract is the most common object of complaints to life insurers and insurers from accidents and illnesses. “Here we come across cases of unfair practices. The most noticeable cases are when the consumer is refused a refund of the premium as part of the cooling period under collective life insurance contracts,” says Yuri Voronin. “Under a collective insurance agreement, the consumer is only the insured person, and the consumer, in fact, reimburses the expenses for the bank that is formally the policyholder under such agreements. In accordance with the provisions of the Supreme Court of the Russian Federation, in this case, the consumer is still recognized by the insurer and, accordingly, should be entitled to a premium refund upon the early termination if he/she applies for the refund of part of the insurance premium within the “cooling period”.
Yuri Voronin admonished that on December 1 this year, changes will come into force, that allow borrowers to return part of the insurance premium upon early repayment of the loan. “Such amendments to the law will positively affect consumers of financial services, since it will become easier to return part of the insurance premium. At the same time, these changes will affect the practice of the FOS decision-making for such disputes: the number of decisions related to satisfying consumer requirements will increase. The new standards are likely to reduce the number of complaints on this issue,” said the Chief Financial Ombudsman.
Another example of unfair practices is the absence of a specific amount of the insurer’s administrative expenses in the terms of the contract or insurance rules in case of an early termination of the contract for reasons other than the cooling period and the absence of the likelihood of an insured event. This may apply to cases of early repayment of a loan. “For example, in some contracts there is a condition that upon termination of the insurance contract the unused part of the insurance premium is returned to the consumer in proportion to the term of the contract minus the administrative expenses of the insurance organization up to 96%. This condition is contrary to the provisions of the law on consumer protection, because it does not contain specific conditions regarding the amount of interest held by the organization,” Yuri Voronin clarifies.
When talking about the medium term, it is possible to reduce the number of appeals against life insurance, since there is a general drop in the market, including the lending market. “And the fewer new insurance contracts, including those in connection with a decrease in the number of loans issued, the less disputes there are,” the Chief Financial Ombudsman notes.
In the period of November 28, 2019 to May 28, 2020, the FOS was also contacted by clients of insurance companies under financial risk insurance contracts (181, 2.6%), voluntary liability insurance (174, 2.5%), and insurance for citizens travelling outside their permanent place of residence (115, 1.7%), voluntary medical insurance (93, 1.3%), liability insurance of legal entities (72, 1.1%), professional liability insurance of tour operators (16, 0.2 %).
Based on the results of consideration of complaints against non-motor insurance, the FOS adopted 1,138 decisions, of which in 300 cases (26.4%), the requirements of consumers of financial services were satisfied, and in 838 cases (73.6%), consumers were refused. Such a percentage of refusals to satisfy the demands is accounted for by the fact that the majority of consumers apply for insurance premiums after the “cooling period”, and with the vast majority of insurers in this case, according to insurance rules, premiums are not refundable, which does not contradict the Civil Code of the Russian Federation, summarizes Yuri Voronin.