Borrower insurance rules for loan agreements introduced
Insurance coverage under a borrower’s life and health insurance policy related to a consumer loan or mortgage agreement shall meet the minimum standard requirements, and the information on insurance terms shall be disclosed to a person in an easy-to-understand form — in a key information document (KID).
The relevant ordinance of the Bank of Russia becomes effective on 1 October 2022.
Currently, insurance policies for loan products contain a vast list of exceptions and have low payments and a complicated compensation procedure. The new rules will help increase the value of credit insurance products for consumers. Specifically, the list of reasons for a refusal to pay indemnities has been notably reduced, and the maximum period for payments may not be longer than 30 days.
In a clear and easy-to-understand KID, a borrower will receive the information on insurance coverage, reasons for a refusal to make a payment, and the amount of the refund of the premium in the case of early termination of the insurance policy. As a result, consumers will be able to make well-informed decisions on whether they need to purchase an insurance policy.