The Financial Ombudsman Service summarises the first year of handling non-motor insurance complaints

The Financial Ombudsman Service has received, according to preliminary data, 20,323 complaints during a year of work on disputes between consumers of financial services and insurance institutions in non-motor types of insurance, which is 10.8% of the total number of complaints received by the Service during this period, Financial Ombudsman Svetlana Nikitina said.

The institution of the Financial Ombudsman Service //(FOS) in Russia sprang into action on June 1, 2019 with the consideration of disputes in motor insurance (CMTPL, hull insurance, VTPL). After November 28, 2019, the out-of-court procedure for dispute resolution was extended to all other types of insurance (except obligatory medical insurance).

In the structure of non-motor insurance complaints, it is life insurance, accident and health insurance (16,361, 80.5% of non-motor insurance complaints), and property insurance (2,483, or 12.2%) that are accounted for the largest number of complaints.

Life, accident and health insurance complaints showed the highest dynamics during the year on a month-to-month basis. There were 318 complaints in December 2019, 565 in January 2020, 1,775 in July and 2,026 in November.

«The significant flow of life insurance complaints is a result of the explosive growth of this type of insurance a few years ago. Dealing with consumer complaints involves a certain time lag between the conclusion of a contract and the emergence of a dispute. There has been a downturn in the life insurance market recently, so in a year or two the number of complaints to the FOS for this type of insurance is also bound to decrease,» Svetlana Nikitina notes.

Life insurance and accident and health insurance are services which are often required to be chosen when applying for a loan. This fact determines the structure of voluntary insurance complaints handled by the financial ombudsmen. In the structure of complaints relating to life insurance and accident and health insurance, disputes relating to repayment of insurance premiums in the event of termination of the insurance contract predominate. «When considering complaints regarding the two types of insurance we look at whether the consumer has been given the option of taking out a loan without the insurance contract. If the consumer had no choice, in case of early repayment of the loan by the consumer, the financial ombudsmen decide on the appeal for the refund of the insurance premium,» Svetlana Nikitina clarifies.

The current regulations allow consumers to cancel an unnecessary insurance policy and return the premium or part of it, and it is the so-called «cooling-off period». As from 2018, this period is a minimum of 14 days. The insurance company has the right to set a longer «cooling-off period» at its own discretion. However, disputes often arise when the consumer tries to recover the premium after the «cooling-off period» has expired.

In recent years, the practice of collective insurance has become widespread in credit insurance, where the insurer is the bank and the borrower is the insured person. The bank charges the borrower a fee for joining the collective insurance agreement. With this form of insurance, it is not easy to recover the premium for early loan repayment. That is why lawmakers have turned their attention to this problem and a law on refunding the insurance premium upon early loan repayment came into force on September 1, 2020. «We expect the innovations to allow consumers to recover the premium under collective insurance contracts as well,» adds the Financial Ombudsman.

Svetlana Nikitina also said that the FOS has encountered disputes on investment life insurance in which the consumer disagreed with the amount of investment income. «However, such cases are isolated and, as a rule, we cannot ultimately agree with the consumer’s calculations on the amount of investment income,» the Financial Ombudsman continues.

According to her, a distinctive feature of voluntary insurance is that the relationship is mainly governed by insurance regulations, unlike CMTPL, where a separate law applies. «Therefore, consumers should first pay attention to the provisions contained in the contract. After all, if the client’s signature is there, it means he agrees to the terms,» says Svetlana Nikitina.

In the FOS practice there have been cases where the first pages of the accident and illness contract state that the insured event is death from any cause. «But then somewhere on the final page of the contract there appears a list of exceptions: death from serious illnesses such as cancer is not included in the insured event, for instance. Such practices can be described as unfair, betting on the customer’s inattention,» she elucidates.

Between November 28, 2019, and November 28, 2020, the FOS made 6,001 decisions on ‘non-motor’ insurance complaints received.

«The decisions made by the Financial Ombudsman that are not in favour of consumers are primarily due to consumers wanting a premium refund when they terminate their insurance contract early, but they apply for it when the «cooling-off period» has already expired. According to the law, the Financial Ombudsman cannot satisfy such a request,» Svetlana Nikitina notes.

Svetlana Nikitina also cited another factor as to why some consumer complaints are not satisfied. «Voluntary types of insurance are more oriented towards the consumer, and the insurer is interested in retaining the client, and always tries to settle disputable situations. Accordingly, in many cases the consumer comes to us when the insurer has refused to satisfy his complaint at the claims stage because the insurer is absolutely sure that their position is correct. And as a rule, the validity of this position is confirmed,» concluded the Financial Ombudsman.

The average claim in non-motor insurance complaints was 130,251 roubles.