When buying a policy, most people look at the price and the sum insured. But the answer to the main question — will the insurer pay in a particular situation — lies in the insurance rules. Let us look at what this document is and how to work with it.
Key terms
- Insurer — an insurance company licensed by the Bank of Russia that assumes the risk and undertakes to make the payout.
- Policyholder — the person who concluded the contract and pays the premium.
- Insured person — the person whose life, health or liability is insured; may be the same as the policyholder.
- Beneficiary — the person who receives the payout under the contract.
- Insured event — an event provided for by the contract or by law, upon which the obligation to pay arises.
Insurance can be voluntary or compulsory. Voluntary insurance is based on the contract and the insurance rules; compulsory insurance follows terms set by federal laws (for example, OSAGO, compulsory motor third-party liability insurance, under Law 40-FZ). For compulsory types, many terms and rates are set by law and Bank of Russia regulations.
What insurance rules are
Insurance rules are a document that the insurer develops for each type of insurance. They set out the general terms and procedure of insurance. A specific contract is concluded on the basis of the rules but, by agreement of the parties, may supplement them or deviate from them.
What the rules must contain
The Law “On the Organisation of Insurance Business in the Russian Federation” (Article 3) requires the rules to contain provisions on:
- the parties and objects of insurance;
- insured events and insured risks;
- how the sum insured, the insurance rate and the premium (instalments) are determined;
- how contracts are concluded, performed and terminated;
- the rights and obligations of the parties;
- how the amount of loss or damage is determined;
- how the insurance payout is determined and the deadlines for making it;
- cases in which the payout is refused, and other provisions.
When the rules are binding on the client
Under Article 943 of the Civil Code, the terms of the rules are binding on the policyholder and the beneficiary if:
- the contract (policy) expressly refers to the rules;
- the rules themselves are set out in the same document as the contract, on its reverse side, or attached to it.
Delivery of the rules is confirmed by an entry in the contract. That is why a signature under the phrase “I have read the rules and received a copy” has legal consequences: it will be extremely difficult to prove later that the rules were never shown to you.
At the same time, the policyholder and the beneficiary may rely on rules referred to in the contract to protect their interests, even if those rules are not binding on them.
How to change unfavourable terms
Under paragraph 3 of Article 943 of the Civil Code, when concluding a contract the parties may agree to amend or exclude individual provisions of the rules and to supplement them. If the contract terms differ from the rules, the contract prevails. This is especially useful for corporate clients: the contract can include the necessary coverage extensions and specify the claims procedure and payment deadlines.
Consumer protection
Individuals enjoy additional guarantees:
- a 14-calendar-day cooling-off period for most types of voluntary insurance (Bank of Russia Directive No. 3854-U);
- the Consumer Protection Law — to the extent not covered by special legislation;
- basic consumer protection standards binding on insurers that are members of a self-regulatory organisation;
- out-of-court dispute resolution through the Financial Ombudsman (Law 123-FZ).
Following the position of the Supreme Court of the Russian Federation, courts interpret unclear terms of a contract drafted by the insurer in favour of the consumer.
What to check in the rules first
- The list of insured events and the exact wording of the risks.
- Exclusions from coverage.
- The policyholder’s obligations when an event occurs: notification deadlines, documents, actions.
- How damage is assessed and the form of payout — cash or repair.
- Deadlines for the decision and the payout.
- Grounds for refusing or reducing the payout.
- Terms of early termination and premium refund.
Specific examples of pitfalls are discussed in “KASKO Pitfalls”. Terms can be looked up in the insurance glossary, and insurers can be compared in the insurance company directory.