Estonian Financial Supervision Authority imposed rules on disclosure of information concerning life insurance contracts
The Estonian Financial Supervision Authority (EFSA) imposed the advisory guidelines titled "Rules on disclosure of information concerning life insurance contracts." The guidelines will enter into force on April 1, 2005.
The guidelines list the minimal required technical information and its contents as well the method and time of disclosure to the customers by also providing more general advice on sharing information with them.
"According to the EFSA's opinion, clients need more information about insurance contracts before signing them, during its effectiveness, upon changing it as well as on an annual basis," commented Kaido Tropp on the necessity of the guidelines, a member of the EFSA management board. "An insurance company has the right to provide the customer with more information than required by law, and it's especially advisable if it serves the purpose of making the product clearer and easier to understand for the customer," added Tropp.
All financial institutions must inform the customer as the consumer adequately, clearly and in comprehensible language on the nature of the offered services and what the contract involves. In such case, there would be fewer situations where a customer signs a contract that actually does not match with his expectations, needs or financial abilities. The EFSA aims to achieve the condition where all insurance companies registered in Estonia disclose to customers the same amount of information.
"Though the insurance contract is by its nature is a relatively safe financial instrument, the customer still faces certain risks when signing it. The customer has to be aware whether cancellation of the contract would accompany with financial losses, what is the mortality risk and how this affects him or her," commented Tropp. "Likewise, the insurer should not lure the customer to assume extra risks by the means of forecasts. If such figures are used, they should be based on the values guaranteed by the insurance contract, by clearly indicating forecasts. When dealing with profit-sharing insurance contracts, the customer has to be explained the principles for determining and distributing the profits," he added.
Once recommendations from the advisory guidelines are implemented, the customer should be able to get from the insurer comprehensive information on premiums, surrender value, technical reserve, and expenses related to the insurance contract, etc. The insurer also has to explain to the insured the meaning of the used terms intelligibly. The guidelines will apply to contracts signed from April 1 on.
The EFSA�s advisory guidelines are available on the homepage www.fi.ee > Legislation > Guidelines of Financial Supervision Authority.
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