You learn that your insurer has had its license restricted, suspended, or revoked. Why did this happen and what should we do now?
What is the difference between restriction, suspension and revocation of a license?
An insurance company may have several licenses for different types of insurance. For example, for life insurance, for property insurance and for compulsory motor third party liability insurance. At the same time, property insurance can be very different: insurance for cars, real estate and even animals (yes, hamsters and parrots are also considered property).
Insurance license restriction
It applies only to a certain type of insurance. The insurance company continues to operate and fulfill its obligations to customers, but cannot sell new policies for the type of insurance for which the license has been restricted. In other words, this situation should not affect the company’s clients – the company is obliged to pay money on all policies in the event of insured events.
Insurance license suspension
This means that the company cannot enter into any new insurance contracts at all, but continues to work with old clients without any changes – to accept regular contributions under existing contracts, to pay out money when insured events occur. Usually the license is suspended if the company’s financial situation is unstable.
As a rule, immediately after the restriction or suspension of the license, the Bank of Russia appoints a temporary administration that manages the insurance company. The interim administration reviews the state of affairs of the company, checks whether it has funds and assets, and ensures that it fulfills its obligations.
There are three further options.
1. License renewal
If the violations due to which the license was restricted or suspended can be eliminated, then the insurance company, under the leadership of the provisional administration, puts its affairs in order. Then the Bank of Russia withdraws its representatives from it, renews the license, and the company continues its work. All previous insurance contracts continue to operate, and after the restoration of the license, the company will be able to enter into new ones.
Sometimes the interim administration finds that the company is simply unable to correct the violations. For example, the insurer does not have enough reserves from which he could pay out money for insured events that may occur. And the owners are not ready to invest additional capital in the company. In this case, the choice is between other options.
If the company is socially significant, that is, its work is very important for the region or even the entire country, the Bank of Russia can take over its financial recovery. The regulator starts the sanitation procedure. In this case, the insurer’s clients need not worry – all their contracts remain in force.
3. License revocation
If it turns out that the financial situation of the company is deplorable, but it does not fall under reorganization, its license is revoked.
In case of gross violations, the insurer is immediately deprived of a license, bypassing the stage of restriction or suspension. For example, if a company systematically fails to comply with the requirements of the anti-money laundering law and its license has already been suspended for this. Or does not send reports to the Bank of Russia at all.
After the license is revoked, the state corporation, the Deposit Insurance Agency (DIA) , begins to manage the insurance company.
Within 45 days after the revocation of the license, the company is obliged to terminate all contracts and within six months – to return money to customers, if this is provided for by their insurance contracts. OSAGO policies are not terminated even if the license is revoked.
If the company is able to fulfill all its obligations and pay off all customers during these six months, then it will simply cease to exist. If there is not enough money for all payments, bankruptcy proceedings will begin – it is also carried out by the DIA.
The company’s license was revoked, but the contract with me has not yet been terminated. Will they pay me money if an insured event occurs?
If the insured event occurred after the revocation of the license, but before the termination of the contract and before the commencement of the bankruptcy procedure, the company is obliged to pay the entire amount of the insurance indemnity. But again, problems are possible if the insurance company does not have enough money in the accounts to pay compensation for all insured events. Then you will need to wait until the bankruptcy procedure begins, and apply for reimbursement to the DIA.
There is a special procedure for OSAGO policies . They continue to operate even if the company’s license has been revoked. It’s just that payments do not come from the reserves of the insurance company, but from a special guarantee fund.
If the accident was your fault and your company no longer has a license, advise the victim to seek compensation from the PCA. If you have been injured in an accident, you can contact not your company with a revoked license, but the company responsible for the accident or the PCA.
How much money should the company, whose license was revoked, return when the contract is terminated?
The refund amount depends on the type of insurance.
For compulsory types of insurance , for example, OSAGO, money is not returned, since the contracts continue to operate.
Under the contracts of accumulative and investment life insurance, the so-called redemption amount (that is, part of the contributions made) will be returned. The amount of this amount depends on the duration of the contract. Usually, the closer the end of the contract, the higher the percentage of return. The table with redemption amounts is always attached to the insurance contract.
For other types of insurance, it all depends on what is written in your contract with the insurance company. For example, life accident insurance contracts usually do not provide for a refund at all. Under property insurance contracts, you can often count on the return of part of the cost of the policy. The refund amount is determined in proportion to the time left until the end of the contract.
The company refuses to pay and says it has no money
The Deposit Insurance Agency, which manages the company after the revocation of the license, is auditing its financial condition. If the insurer has money in the accounts, all customers will be refunded their part of the cost of the policy.
But it may turn out that the company does not have enough money to terminate all contracts and pay off all customers. Then you have to wait for the end of the bankruptcy procedure.
During the bankruptcy process, the DIA evaluates all the company’s assets, sells its property, and uses this money to pay debts to the insurer’s clients. But, unfortunately, there is no guarantee that this property will be enough to repay all debts in full.
What can I do to improve my chances of getting my money back?
The most important thing is to apply to the DIA as early as possible.
As soon as the insurance company is declared bankrupt and bankruptcy proceedings begin, the DIA reports this on its website.
If the contract was not terminated with you and the money was not paid, or if an insured event occurred and you did not receive compensation, then you need to submit an application to the DIA demanding to pay the money. But it is important to have time to do this within two months from the moment of declaring bankruptcy. After this period, the register of creditors’ claims is closed (and you are considered one of the creditors of the insurance company, since it owes you money).
The date of submission of the application is the date of the registration stamp, which will be given to you at the DIA if you come there in person. Or the date of sending on the postal stamp, if you decide to send documents by mail.
What documents need to be submitted to the DIA?
1. An application in which you need to indicate the amount you require to return, and on what basis.
For example, you paid 60,000 dollars for an annual auto insurance policy. There are still three months left until the end of the policy. You can demand a refund of 15,000 dollars for the unused insurance period.
Under accumulative and investment life insurance contracts, the return figure must be taken from the table of redemption amounts, which is attached to the contract.
2. Insurance contract (policy).
3. Documents confirming the insured event and the amount of damage (if any), or a court order (a writ of execution).
4. Personal data: full name, passport details, bank details for transferring money, postal address, contact phone number.
It is necessary to transfer the original documents or notarized copies to the DIA. If you come in person, you can bring simple photocopies with you, then they will be certified by a DIA employee, for example, an expedition worker.
What if I don’t have time to submit my application by the due date?
You will still be able to claim payouts, but the chances of receiving the money will be less.
Clients of the insurance company receive payments in turn, depending on the type of insurance they purchased. The sequence is as follows:
- Cumulative life insurance, if the payment period has already come.
- Compulsory insurance, including OSAGO.
- Life insurance (if the payment deadline has not come), voluntary medical and other types of personal insurance.
- Civil liability insurance for causing harm to life or health (except OSAGO).
- Property insurance and civil liability insurance for damage to property (except OSAGO).
It does not matter when exactly you bought the policy – ten years or one day before the license was revoked. All policyholders of the same type of insurance receive payments at the same time.
First, the money is distributed among those who managed to enter the register of creditors on time. If the proceeds from the bankruptcy process are not enough to pay them off in full, then the money will be divided among all clients within the same queue. Moreover, the amount will be calculated in proportion to the size of the debt.
Payments to those who missed the deadline and did not get into the register will be made only if there is money left after paying off debts to the owners of policies of the same type that managed to enter the register.
And only when (and if) they are fully reimbursed for their debts, payments to customers of the next stage will begin – that is, another type of insurance.
If you applied after the payments of the later queue began, you will have to wait until they end. Only then can you expect to receive money.