After one year from the last coordinated intervention of IVASS and the Bank of Italy in this sector aimed at better protecting policyholders/borrowers, IVASS issued a new letter to the market addressed to insurance undertakings and intermediaries enrolled in section D of IVASS Registry of insurance intermediaries (banks and financial intermediaries) in relation to policies linked to loans. The aim of the IVASS letter is to highlight to insurance undertakings their obligations in case of early partial repayment of the loan by the borrower (and not only in case of full early repayment) already set out by both IVASS and the Bank of Italy as a critical issue in relation to these contracts. Indeed, as a result of a recent investigation carried out on this market segment, IVASS discovered that many insurers not only did not reimburse the relevant portion of the premium amount but did not even provide for this in the policy conditions of their PPI products.

In this context and in order to promote full compliance with the general principles of transparency and fairness in the offer and execution of insurance contract, IVASS recommends that within 90 days from this letter, insurance undertakings and financial intermediaries:

  1. implement appropriate procedures in order to grant the policyholders the right to be refunded the amount of the premium not used (proportionally) in case of early partial repayment of the loan;
  2. clearly disclose such procedures in the policy general conditions of any new contract, by explaining that the policyholder has the right to partially reimburse the loan amount to the bank and consequently have the portion of the premium amount paid to the insurer refunded by the latter; and
  3. take all appropriate measures to grant the immediate refund of the unused premium to the policyholder.

Please click here to download the IVASS letter to the market (available in Italian only).