The Agency of the Republic of Kazakhstan for Regulation and Development of the Financial Market
Is the insurance premium under an insurance contract concluded when obtaining a bank loan refundable in the event of early loan repayment and, consequently, termination of the loan agreement?
In order to strengthen the protection of consumers of financial services and ensure transparency in the terms of insurance contracts, amendments to the legislation regulating the activities of insurance organizations came into force on September 12, 2022.
According to part three of paragraph 2 of Article 842 of the Civil Code of the Republic of Kazakhstan, in the event that an individual policyholder refuses an insurance contract linked to a loan agreement due to the fulfillment of obligations to the lender (early repayment of the loan), the insurer is obliged to return the paid insurance premium, minus the following:
the portion of the insurance premium proportional to the period during which the insurance coverage was active;
costs related to the termination of the insurance contract, not exceeding 10% of the paid insurance premium.
Additionally, it is clarified that in accordance with paragraphs 1 and 4 of Article 403 of the Civil Code of the Republic of Kazakhstan, upon termination of the contract, the obligations of the parties are terminated. A refund of what was performed under the contract is only possible if it is directly provided by law or by mutual agreement of the parties.
Thus, in the case of early repayment of a bank loan, the policyholder has the right to a partial refund of the insurance premium in accordance with current legislation, provided that no insured event has occurred.
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