As for the life insurance product line, there is a tendency of population transition from simple risk products to complex structured investment-insurance products in the world, which are sold primarily through bank distribution networks and electronic sales channels. Such product as Unit-Linked, which is a comprehensive product including insurance coverage in the event of death, accident and/ or illness and an investment component including the customer’s funds investing into the funds chosen by him, has become widespread. In addition to the above mentioned, the insurer may act as a management company itself or transfer this role to a third-party management company.
The key difference of the Unit-Linked from Investment Life Insurance (ILI) is the lack of a guarantee of full amount of insurance premiums paid upon termination of the contract period. In addition, there is a number of differences in the sphere of the insurer's internal processes and requirements (capital estimation, assets segregation, etc.). At the same time, the Unit-Linked is distinguished with greater transparency and flexibility comparing with the ILI, and with a wider range of investment proposals. A customer himself chooses the savings investing options. The customer is responsible for a part of the investment, which causes a higher profitability of the Unit-Linked comparing with the ILI and popularity of this product in the countries with developed insurance system.
Foreign regulators consider life insurance products not only as a tool for saving, but also as a mechanism for increasing of the level of citizens protection in the event of adverse events related to the life and health. Life insurance is also a source of financing of the target expenses of citizens, such as future expenses for education of children, prolonged care for the elderly and so on. Taking into account the importance of life insurance, the regulators are paying close attention to this segment of financial market all over the world, including creation of preferential terms and conditions for life insurance, which makes it possible to use it as one of the most effective tools for social policy formation. European practice is based on the need to maximize detailed requirements for life insurance products in terms of transparency of the terms and conditions and unambiguous interpretation of insurance agreements, content of information provided by the insurer to the customer, as well as frequency of its provision.
The role of life insurance as a tool for the national capital formation is largely related to tax incentives for both individuals and legal entities using this tool. So, in the US, the tax deduction for corporate insurers is $50,000 per year per each employee of the company, which is incommensurable with Russian indexes. Almost all OECD countries have tax incentives related to life insurance promotion, namely:
• tax deductions upon entering into life insurance agreements (Austria, Belgium, Denmark, Korea, Luxembourg, Portugal, France, Germany, Switzerland, Japan);
• tax benefits upon insurance benefits payment (Australia, Austria, Belgium, Denmark, Spain, Canada, Korea, the Netherlands, Finland, France, Germany, Switzerland, Japan). A differentiated tax rate has been imposed on income from life insurance investment in France (in the event of insurance benefits excess over the insurance premium), which is decreased in line with increasing of the term of life insurance agreement, and it has led to the situation when French people have become more active in long-term life insurance agreements execution. So, if a life insurance agreement is entered into for up to 4 years, then the income is taxed at the rate of 35%, if the agreement is entered into for a period of 4 to 8 years, then the rate is 15%, and if the term of the policy exceeds 8 years, the income tax rate decreases up to 7.5%.
Thus, the world experience shows that upon regulatory barriers elimination, tax incentives and sufficient level of financial literacy of the population, life insurance can represent a significant segment of the financial market and be a significant tool for citizens’ interests protecting.