LITHUANIA: Property insurance disputes raised by 28% in 2018

The number of disputes between insurers and customers has raised mainly due to the low degree of customers' understanding over their insurance products, an analysis over the property insurance market recently published by Bank of Lithuania says.

During 2018, on average, 75-80% of property insurance contracts in Lithuania were represented by renewed and extended contracts from the same old customers with the same properties and assets. Most of the property insurance contracts in Lithuania are long-term ones (longer than three years), usually made under bank loans.

All insurers, with the exception of Swedbank, took as approach longer than one year contracts. The highest share of long-term property contracts was seen at Seesam (46% share in total property contracts), followed by If P&C (38%) and Compensa (21%), while BTA and Gjensidige own only 3% long-term contracts in their portofolios.

In terms of days necessary for insurers to pay for their claims, year 2018 recorded almost the same performance seen the year before. On average, 70% of claims were paid within 30 days, 26% took between 1 and 6 months to be paid, 3% between 6 months and 1 year, and about 1% claims took more than a year to be settled.

The average paid indemnities varied for insurers. The highest average indemnities for the constructions were paid by BTA (EUR 1,104), Seesam (EUR 1,046) and Gjensidige (EUR 698). The highest average indemnities for contained goods were recorded by BTA (EUR 481), Lietuvos draudimas (EUR 441) and Seesam (EUR 422).

Insurance frauds varied from insurer to insurer as well. While some recorded only few cases of fraud others faced almost 20% frauds attempts from the total number of claims. Most of the times, insurers refused to pay any indemnity because of uninsured events and risks (e.g. construction faults, natural decay of materials), damages to uninsured buildings (e.g. annexed barns) or damage levels below the contracted franchise. The decision to reduce the insurance benefits was mostly related to the non-fulfillment of the client's obligations (e.g. not notifying the insurer about the event in time, neglection of insurance company's recommendations to reduce the damage).

"The information provided by the insurers, as well as Bank of Lithuania's experience in dealing with disputes between consumers and insurance companies, confirms, among other things, that the false expectations of the clients regarding property insurance contracts are often determined by consumers' lack of knowledge about contracts' terms and conditions and their ability to understand these conditions and their application," wrote Bank of Lithuania in their survey.

Bank of Lithuania already took steps towards reducing the number of disputes, by implementing in October 2018 a new set of regulations that require insurance companies to seek for more clarity and simplicity in their contractual conditions, as well as to better inform their potential customers before selling them any insurance products.

For a more detailed presentation of the property insurance market (in Lithuanian language), you can access the official report made by the Bank of Lithuania, at this link.

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