Nowadays requirements set by national and international banks in Ukraine to insure pledged property serve as the significant factor driving the insurance market in our country. On the one hand, banks are interested in such kind of insurance as they eliminate the risk of loosing pledged assets. On the other hand, they benefit from the interest paid by the insurance companies. Unfortunately the interest rate has been almost doubled recently which in turn triggered the price of loans. Therefore lenders often concern themselves with the question – is it possible to stand your ground in the relationship with banks?
According to the statistics a couple of years ago both national and international banks in Ukraine used to withhold 10-15 % of each insurance premium paid under insurance policies covering pledged property. Today this number is around 30-40 %. By the way, banks abroad do not usually profit from insurance let alone receive interest paid by their partner insurance companies.
The good thing is - there are several options which allow cutting insurance expenses anyway.
First of all, make sure to read the clauses of your pledge agreement which refer to requirements regarding insurance, closely. The common wordings come down to the following:
1) Under the pledge agreement you are obliged to conclude insurance policy in accordance with certain terms and conditions. In this case your choice of insurers is not limited to the bank insurance partners only. The only requirement is to name the bank as the beneficiary under the agreement.
2) Under the pledge agreement you are obliged to insure your property by concluding agreement with an insurance company accredited by the bank. It well may be that all the insurance companies accredited by the bank pay equal interest while the terms and extent of insurance coverage offered differ significantly. In some cases bank recommends that the agreement be signed with a particular insurer despite the fact that several insurers are actually accredited by it. In this case it’s reasonable to find out the complete list of insurance partners the bank allows and to insist on choosing the one that you find most suitable. Such lists are usually available on the banks’ websites, their call-centers as well as here.
3) Under the pledge agreement you are obliged to insurer the pledged property in the certain insurance company. It’s a frequent case when it comes to loans issued to the individuals by national and international banks in Ukraine. Well, your hands are tied here, unfortunately, unless the certain company is imposed by a manager in the bank rather than in accordance with negotiated terms and conditions between bank and insurer. If the manager’s actions are unauthorized you are free to call bank’s hotline to file a complaint. Experience has proven it that in 90 % of cases this condition is lifted from the agreement.
Large corporate clients can go another way. They can conclude an insurance agreement with an insurer of their own choice with concluding the further addendum naming bank as a beneficiary. This way they can around 30 % of insurance premium. Although this option is available only for those companies which have strong bargaining point.
Finally, it makes sense to negotiate the disputable insurance-related clauses before signing the pledge agreement. Since you are actually the one paying for insurance, you should be the one making a decision regarding insurance partner.