On 28 March 2023, the Bank of Lithuania published a report on consumer disputes (the Report). In this Report, the Bank of Lithuania provided recommendations and guidelines for insurers that provide insurance services to consumers in Lithuania. The Report aims to ensure that insurers comply with legal regulations and follow best practices to prevent consumer disputes. Further, we provide the main takeaways from this report.

Insurers’ duty to disclose information

  • For insureds to properly fulfil their duties under the policies, insurers must ensure active communication with them and respond to their questions about interpreting the policy’s provisions during the policy validity period. Otherwise, insurers may lose the right to apply negative consequences if insureds fail to perform or improperly perform their duties under the policy.
  • Insurers must provide all insurance conditions, T&Cs and other documents explaining the insurance conditions to the insureds (both under individual and group insurance contracts) before concluding the policy.
  • Delivery of a copy of the policy schedule or certificate is not considered proper acquaintance of the insureds (under the group insurance contract) with the T&C of the policy. Disclosure is considered to be proper when insureds confirm that they have been familiarised with the terms of the policy, and received a copy of T&C before obtaining insurance cover (under a group insurance contract).
  • Circumstances that are considered to involve increased (uninsured) risk have to be explicitly disclosed in the policy or in other pre-contractual information.
  • Instead of waiting for the data required for claims administration to be provided by insureds, insurers must actively communicate with them and collect the data themselves.
  • A violation of the insureds’ duty to notify the insurers of the event at the time specified in the policy must not be treated formally, i.e., insurers cannot reduce the indemnity in all cases due to a formal breach of this duty. Insurers can reduce the indemnity due to delayed notification only if they prove that failure to notify about the insured event had a negative effect on the insurers’ assessment of the insured event and determination of loss. In addition, the insurers must clarify why the notification was late.

Insurers’ right to refuse to pay insurance indemnity or to reduce it

  • Insurers have the right to reduce insurance indemnity or refuse to pay it if:

i) the insured provides misleading information about the insured event negligently (i.e., if the misleading information was provided intentionally or negligently) or

ii) the insured has improperly performed its duties under the policy and this has had a negative impact on the insurers’ claim administration (i.e. if insurers are able to confirm that the insureds’ breach of duty negatively affected the insurers’ obligation to objectively assess the circumstances of the insured event and the amount of damage).

  • Insurers do not have the right to refuse to pay an indemnity due to any violation of the insureds’ duties – reduction of insurance indemnity or refusal to pay it should be proportionate to the breach of duties committed. Providing false information to the insurers or committing a violation leading to the occurrence of the insured event is considered a significant breach of duty.