Expenses of the recipient of insurance services: composition and systematization

During the period of validity of the insurance contract, during the preparation for its conclusion, the recipient of the insurance service must pay various expenses due to contractual obligations to fulfill the conditions, requirements, and requests of the insurer. Some of the costs are hidden. The insurer is not obliged to inform the recipients about charging them during the insurance coverage period. It is assumed that this follows from the very nature of the obligations imposed on the policyholder by the contract. As a result, there may be a problem of non-compliance of the real financial burden of the policyholder with the expected costs, as in most cases, the costs are associated with the payment of the insurance premium only. The reason is that private clients have a low level of financial literacy and when entering into an insurance contract, they do not associate its individual terms with the upcoming expenses. Corporate clients, both in tax and accounting, include only insurance premiums in insurance expenses, as required by the current tax legislation. Assessment of the economic efficiency of insurance as a method of risk management and financial planning of insurance protection should be based on all types of expenses of the policyholder. The author proves that although diverse, the costs composition depends on the scenario of the development of insurance relations, as well as the conditions for the implementation of insurance protection. It is noted that there is a terminological uncertainty in which the concepts of “insurance costs”, “insurance costs”, “expenses related to insurance”, “expenses of the policyholder” are used as synonyms, which is not true. In relation to the entire set of expenses of the recipient of insurance services, it is proposed to use the concept of “financial burden of the recipient of insurance services”, the theoretical and methodological development of which is set as one of the tasks of the author’s further research. It is suggested the insurance company should be obliged to inform the person having intention to enter into an insurance contract about the total possible expenses that may arise from recipient’s insurance services in connection with the negotiation and execution of the insurance contract during the validity period in the frame of the existing security documents.