Banks and insurance companies have once again combined their forces to meet the needs of their clients and to ensure a greater sense of security and an easier access to information to them. The Polish Bank Association (ZBP) and the Polish Insurance Association have developed II Good Bancassurance Practice Recommendation to secure the clients’ legal and economic interests.
The document “Recommendation on Good Practice in the Scope of Financial Insurance Combined with Bank Products Secured by Mortgage” developed by ZBP and PIU is to determine clear principles in the Bank-Client relationship. The Recommendation regulates general principles for the conduct of the bank entering on its own behalf and account into a financial insurance contract. It is a policy ensuring the coverage of the bank’s losses due to events covered by the insurance and connected with a credit (or a loan) secured by mortgage. ZBP shall request the banks to implement the provisions of the Recommendation by July 2011.
“We assume that as a result of implementing this recommendation, the method of constructing financial insurance and the relationship between the bank and the insurer will become consolidated. Information policy standards with respect to the clients will be determined and a proper information contents of contracts and other promotional or information materials given to the clients ensured,” said Krzysztof Pietraszkiewicz, the President of ZBP.
The Recommendation indicates expressly that documents given to the clients ought to be written in a clear and unambiguous manner, whereas any doubts ought to be interpreted for the benefit of the client. “This especially concerns key definitions such as, for example, own contribution which is required. The response we have received indicates that there have been many misunderstandings in the relations between banks and potential debtors due to unclear definitions precisely. The Recommendation solves this problem,” says Jan Grzegorz Prądzyński, the President of PIU.
The Recommendation will cover four types of insurance contracts which have been considered to be the most popular in the context of mortgage loans: bridging insurance, low own contribution insurance (missing own contribution), real estate value insurance and legal title insurance. The key and utmost important part of the Recommendation is to determine the bank’s information obligations towards the client, i.e. to provide the client with information on the concluded financial insurance contract. The documents made accessible to the client ought to contain the following information: subject of insurance, scope of insurance protection, information on the entity authorized to receive insurance money, and information on the insurance company’s entitlement to recourse with respect to the client.
In accordance with the opinion expressed on multiple occasions by, among others, the supervisory body, a provision was included in the Recommendation that the client cannot bear the cost of the insurance fee, especially when the bank as the insurer ought to pay it. By analogy to the principles adopted in the first recommendation regarding group insurance, it was also pointed out that the costs connected with the increased risk of the Bank will be accrued only for the period during which the risk occurred.
After the Recommendation comes into force, ZBP intends to monitor its application and prevalence as well as to communicate progress in its implementation by subsequent banks and insurance companies. ZBP hopes that Good Bancassurance Practice will become a commonly binding standard in the scope of services provided by banks.
In 2009 I Recommendation was implemented which regarded protective insurance combined with bank products, and executed within the group insurance formula. The main part of the recommendation constituted the bank’s obligations in the scope of providing the client with clear and full information regarding insurance protection conditions which he is covered by. After the I Recommendation was announced, ZBP and PIU analyzed the number of complaints which were sent to the Bank Consumer Arbitration (Bankowy Arbitraż Konsumencki) proper for this subject. In 2010 the reported number of complaints substantially decreased. Thus, one can assume that the proposed solutions have been embraced by the market and that they fulfill their role.
PIU and ZBP have begun working on III recommendation for the bancassurance market. It will concern another large and extremely important part of the market – saving and investment insurance. The requests for possible remarks and suggestions regarding III Recommendation have already been sent to the representatives of the Minister of Finance, the Polish Financial Supervision Authority (KNF), the Polish Insurance Ombudsman, the Office of Competition and Consumer Protection (UOKiK), the Human Rights Ombudsman and the Government Representative for Equal Treatment.