Testing will help a person assess if the terms of life insurance with an investment component are clear to them and if they meet their expectations. It will also help reduce misselling, when investment or endowment life insurance (ILI or ULI) is sold, in fact, under the guise of other financial products, such as deposits.
The Central Bank notes that the insurer will be able to avoid testing in only three cases. Firstly, if the buyer has the status of a qualified investor, which means they must understand the risks and features of complex financial instruments. Secondly, if the buyer pays a large insurance premium; and they are interested in understanding the contract terms as much as possible.
Thirdly, if the terms of the contract guarantee that the buyer will receive at least 95% of the deposited funds at any time in case of early termination of the contract, and they will not incur losses if they miss making no more than three regular installments within six months, but make them within the same period. “Additional mechanisms for protecting the interests of the client are provided for this situation; after concluding an investment life insurance or endowment life insurance contract the insurer should remind that this is not a deposit and that the money can be returned during the cooling-off period. And if the client misses the next installment, remind them of the consequences of missing it,” the regulator notes.
Source: https://tass.ru/ekonomika/22003449
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