The importance of demographic risk in determining the insurance nature of unit-linked policies

With decision No. 9418/2024 of April 9, 2024, the Italian Supreme Court ruled again on the nature of unit-linked policies.

The ruling, recalling the previous cases law on the point, highlighted that unit-linked policies, to be qualified as an insurance product, must contain a demographic risk consisting of an event linked to human lifespan, upon the occurrence of which the insured is entitled to an insurance benefit (though reduced compared to the initially invested capital).

Based on these assumptions, the Supreme Court reaffirmed that insurance nature cannot be qualified in so-called pure unit-linked policies, where the sum due to the insured:

  • solely depends on the value of the underlying financial parameter when the obligation becomes due;
  • the insured is exposed to the risk of losing the entire invested capital;
  • the event linked to the human lifespan serves as a mere temporal parameter to identify the moment when the insurance benefit will be paid off;

and therefore, the demographic risk is merely apparent and is not shifted from the insured to the insurer.