Bank of Lithuania
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Insurance companies don’t always ensure that unit-linked life insurance contracts best meet the consumer’s needs. A study performed by the Bank of Lithuania shows that violations are committed in 24 per cent of concluded unit-linked life insurance contracts.

“The most common violation — in concluding a contract the consumer is offered unsuitable investment directions or proportions. Also, the consumer’s risk category isn’t always properly assessed”, says Renata Babkauskaitė, Head of the Financial Services Supervision Division of the Financial Services and Market Supervision Department of the Bank of Lithuania.

According to her, the Bank of Lithuania’s Supervision Service, having drawn the attention of insurance companies to the identified deficiencies, indicated the measures that could be taken for the operation of conditions best for the consumers and prevent the appearance of law violations in the future. The attention of insurance companies was also drawn to the unsuitable examples of practice and models of good practice that were identified in the study report.

Before concluding a life insurance contract an insurance company has to define the consumer’s needs and, taking into account the information provided by the customer, offer the insurance product that best suits the consumer’s needs — a basic risk insurance, risk insurance with accumulation of funds, fund investment with minimum insurance coverage, etc.

In addition, according to the provided information, the insurance company has to assess whether the consumer understands well enough the risk that is characteristic to unit-linked life insurance contracts and make sure that the offered unit-linked life insurance contract directions are in accordance with the consumer’s expectations and their acceptable risk-level.

The study selected life insurance companies that occupy a significant part of the unit-linked life insurance market. From the unit-linked life insurance contracts concluded in February 2012–2013, 134 insurance contract cases were randomly selected, out of which 32 cases where found to have violations. The report of this study is published on the Bank of Lithuania’s website.