The place of investment life insurance in personal finance

Vlasova Yuliya Ashumovna ORCID: 0000-0003-3450-4939 PhD in Economics Associate Professor; Department of State and Municipal Finance; Plekhanov Russian University of Economics Associate Professor; Faculty of Finance and Banking; Russian Presidential Academy of National Economy and Public Administration 115054, Russia, Moscow, Stremyanny lane, 36 ja.vlasova@mail.ru

Gerzelieva ZHanneta Il'yasovna ORCID: 0000-0003-1387-0593 PhD in Economics Associate Professor; Department of State and Municipal Finance; Plekhanov Russian University of Economics 115054, Russia, Moscow, Stremyanny lane, 36 gerzelgi@yandex.ru

Investment life insurance is a financial product that combines elements of life insurance and investment. It is offered by insurance companies, allows you to insure a person's life and at the same time invest part of the insurance premiums in various financial instruments such as stocks, bonds or mutual funds. There are several main features of investment life insurance.

1. Insurance coverage: In case of death of the insured person, the beneficiaries (beneficiaries) receive the insured amount.

2. Investment component: Part of the contributions is directed towards investments, which can provide potential capital growth. Investments are divided into two parts: guarantee and investment. This separation is designed to protect investments from market fluctuations. The guarantee part is invested in reliable instruments, such as deposits or government bonds. The income on this part allows the insurer to return to the client at least the amount that the latter deposited. The investment part is directed to high-yielding, but also riskier assets. Here, the policy holder can choose an investment strategy — where the company will invest. The income will depend on the chosen strategy. But unlike the same deposits, investment income is not guaranteed and is generally unpredictable.

3. Flexibility: Many products offer the ability to change the amount of contributions, the duration of the policy and other conditions.

4. Tax advantages: In the Russian Federation, there are tax benefits for ILI and an investment tax deduction. When applying for a residence permit for a period of 5 years or more, the client is entitled to a tax deduction, but not more than 150 thousand rubles.

5. Access to funds: Depending on the terms of the policy, the insured may be able to partially or completely withdraw funds from the investment component.

Research methodology.

In order to evaluate the ILI product for both the financial market and personal finance, we will use both traditional methods such as analysis, synthesis, comparison, and SWOT analysis and a risk matrix. A wide range of methods in assessing the features of such a financial product as ILI will allow us to draw the most reliable conclusions.

Analysis of statistical information on the investment life insurance (ILI) product It can include various aspects such as sales dynamics, customer demographics, portfolio structure, investment returns, and payout levels. Here are the main directions for analysis:

1. Dynamics of ILI sales. Sales volume: The study of the annual dynamics of ILI sales allows you to assess the growth or decrease in interest in the product. You can compare data over several years and identify trends. Seasonality: Analyzing seasonal fluctuations in sales can help you understand when customers most often make the decision to purchase an ILI.

2. Customer demographics

• Age and gender: Identifying the age group and gender of clients who choose IPJ will help them better understand their target audience.

• Socio-economic status: An analysis of clients' income, education, and professions can provide insight into which groups of the population are most interested in housing.

3. The structure of the ILI portfolio:

• Product types: Analysis of various types of ILI (for example, fixed or variable returns) and their share in the total portfolio.

• Duration of policies: Study the distribution of policies by duration (for example, 5, 10, 15 years) It can help identify customer preferences.

4. Return on investment. Average return: An analysis of the average return on various investment strategies used in the framework of ILI. Risks and volatility: Assessment of the risks and volatility of the profitability of investment assets that are used in the framework of ILI.

5. The level of payments and insured events:

• Payout statistics: A study of the payout level for ILI policies, including the number of times clients have received payments and the average payout amounts.

• Reasons for payments: An analysis of the reasons for payments (death of the insured, survival until the end of the policy period, etc.).

6. Customer satisfaction and retention:

• Customer surveys: Conducting surveys to assess customer satisfaction with the ILI product and identify the reasons for refusing to renew policies.

• Customer retention rate: Analysis of the proportion of customers who continue to renew their policies after the expiration date.

7. Competition in the market. Competitor analysis: Comparison of ILI offers from various insurers, including terms, tariffs, and additional services. Market and trends: Assessment of the general state of the ILI market, including new trends such as digitalization and the use of technology to attract customers.

The analysis of statistical information on the ILI product provides valuable information for insurance companies, allowing them to adapt their offers to customer needs, improve marketing strategies and increase customer satisfaction. Such an analysis also helps in making strategic decisions and managing risks.

Analysis.

In Russia, the investment life insurance market is tightly regulated. The basis is the Civil Code of the Russian Federation and the federal laws "On the Organization of Insurance Business in the Russian Federation" and "On the Securities Market", as well as local regulatory acts of the Bank of Russia. These laws protect the rights of policyholders and control the activities of insurance companies.

The Bank of Russia acts as the supervisory authority for insurance companies providing services under life insurance contracts, including ILI, and regulates key aspects of their activities: capital requirements, information disclosure rules, and fulfillment of financial obligations. In recent years, the Bank of Russia has strengthened its control over the ILI sector, introducing additional requirements for financial transparency and reducing risks for customers.

In 2023, the investment life insurance market has demonstrated diverse trends reflecting changes in consumer preferences and economic conditions. According to industry research, the total volume of ILI sales increased by 15% compared to 2022, indicating a growing interest from customers in this product as a way of long-term savings and protection ^[1].

The total amount of premiums collected under ILI policies amounted to 150 billion rubles, which is approximately 25% of the total volume of the life insurance market. This share is steadily increasing, confirming the growing popularity of ILI among Russian consumers. ^[2] The largest growth is observed in the segment of youth clients, which indicates that young families are increasingly turning to IPR for financial planning.

Among the various offers on the market, the most popular are policies that combine life insurance with investments in stock and bond markets. Products with a higher share of the investment component show the greatest growth dynamics, as customers seek to earn additional income in conditions of high inflation and instability in financial markets. About 60% of the new policies were concluded with investment funds, which indicates a preference of clients for riskier but potentially more profitable options.

2023 was also the year of the introduction of new technologies in the insurance process. Insurance companies are actively developing online platforms for the sale of ILI, which improves accessibility and simplifies the purchase process. In addition, there has been a trend towards the individualization of policies, allowing customers to customize conditions according to their needs and goals.^[3]

From the point of view of legislative regulation, new tax incentives for investors were introduced this year, which also contributed to an increase in interest in ILI. Simplification of procedures for obtaining insurance payments and tax deductions has made the product more attractive.

Despite the positive trends, the ILI market is facing a number of challenges. Competition from traditional banking products remains high. Clients sometimes prefer simpler and more understandable tools, such as deposits, which offer guaranteed returns and are insured by the deposit insurance system.^[5]

In 2024, the ILI is available to customers aged 22 to 65. The policy is most often concluded for a medium-term period of 3 to 5 years, which is psychologically easier for the population than long-term investment programs. Unlike other products, the money is deposited once. Moreover, the Bank of Russia, amid growing interest in the instrument, made some changes to the procedure for providing ILI in 2024. Thus, the cooling-off period has been significantly increased: up to 30 days for contracts with a one-time contribution and up to 1.5 months for contracts with regular contributions. The Bank of Russia also increased the consumer value of ILI by prohibiting insurance companies from refusing clients under investment life insurance contracts, citing the sanctioned blocking of payments from foreign counterparties.

The operating procedure of the tool is as follows. An individual enters into a contract with an insurance company. The insurance company channels his money into an investment strategy. Throughout the entire term of the contract, the life and health of the insured are insured: in the event of difficult life circumstances, the insurance company makes an insurance payment. Moreover, the types of insurance events can also be selected. At the end of the contract, the client returns his investments in full, taking into account the guaranteed insurance amount (GSS) in the amount of 100% ^[6].

In view of the growing demand among the population for alternative ways of saving and accumulating funds, in order to visually present both the positive and negative properties of the product, the authors conducted a swot analysis of the product.

Fig. 1. SWOT analysis of the ILI

Source: compiled by the authors

Thus, investment life insurance is an interesting product, which nevertheless is not without risks. However, due to its "combination", it can be beneficial for the population in various life situations. Firstly, for parents planning their children's education, IPR can be a great way to save money. Long-term investments under such a policy allow you to accumulate capital that will be available at the time when you need to pay for your studies. This not only ensures targeted accumulation, but also reduces the risks associated with financial market fluctuations.

Secondly, young families can consider IPR as a means of financial protection in case of unforeseen circumstances. The policy guarantees the payment of capital upon the occurrence of an insured event, which ensures financial security and protects savings. In this context, the ILI acts not only as an accumulation tool, but also as an important component of the financial planning of the family budget.

For those who are thinking about retirement benefits, a pension plan can be an effective solution. Long-term investment allows you to get a return significantly higher than the level of ordinary bank deposits. This is especially true in conditions of high inflation, when saving and increasing savings becomes a priority. Thus, ILI acts not only as a way of accumulation, but also as a tool for financial stability in old age.

Taking into account these factors, ILI can be considered as an attractive and profitable tool for those who seek not only to provide financial protection, but also to achieve long-term investment goals.

Conclusions

Investment life insurance (ILI) is a multifunctional financial instrument that combines elements of insurance and investment. With the growing literacy of the population, their interest in diversifying the financial instruments used in managing family finances is growing. Expanding financial horizons will allow the population to look at this tool critically, in terms of benefits for their personal budget. Undoubtedly, this will lead to an increase in demand for this product in the next few years. The ILI market will continue to grow in the coming years. We see an increase in customer interest in combined products, as well as policies with sustainable investments that provide protection against inflation.

Investment life insurance is an effective tool for those who are looking for a balance between protection and capital accumulation. It is suitable both for individual financial planning and for ensuring the future of the family. With the right approach and an informed choice of policy terms, ILI can become a reliable means of achieving financial goals and ensuring long-term stability.

However, since ILI is not without risks, such as commissions and fees, the complexity of the product and its long-term nature, this may restrain public demand. In this regard, the active popularization of the product in the media and applications of banks can create a clearer and clearer picture of the product and increase the loyalty of the population to it. For personal finance, this product allows you not only to partially hedge personal risks of loss of health and life, but also the opportunity to receive investment income at the same time. The return guarantee of the invested funds, prescribed in the contract, as well as the current tax deductions that allow you to return up to 19,500 rubles, make the ILI no less attractive tools than the IC. And in conditions of low interest rates, they are more attractive on the market than deposits. Among other things, ILI forms a propensity for medium- and long-term planning of a personal or family budget, which affects financial literacy. Such individuals will not commit rash and illogical actions in the financial market, managing their assets competently. In turn, insurance companies can support the demand for the product by introducing various, possibly customized, benefits and bonuses for customers, as well as reducing commissions and fees under ILI contracts. In return, financial institutions receive medium- or long-term ruble liquidity, which will have a positive impact on the development of the financial market as a whole. Technology adoption and customization of offerings will be key success factors in this segment.