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The Ministry of Economics Proposes Legal Amendments to Strengthen Consumer Protection in the Insurance Sector
The Ministry of Economics (MoE) has submitted to the government a set of proposed amendments to the Insurance Contract Law and the Insurance and Reinsurance Distribution Law aimed at improving the quality of insurance services and ensuring a higher level of consumer protection.
The draft laws aim to enhance the provision of insurance services by improving policyholders'—particularly private individuals'—understanding of insurance contracts, their content, and how they are applied. These changes were prompted by the July 2024 floods, during which several insurance providers refused to pay compensation based on their interpretation of existing laws. This precedent highlighted the need for clearer and more transparent legal regulation to ensure stronger protection of consumer interests and the uniform application of requirements in the provision of insurance services.
“After the devastating floods that affected several regions of Latvia, the public expects insurance companies to act responsibly in similar situations. We cannot allow individuals impacted by disasters to be forced to prove whether they received documents that the insurer is obliged to provide. These amendments reinforce legal protection for consumers, starting with clear and comprehensible terms that are interpreted equally by both contracting parties,” emphasized Jurgis Miezainis, Parliamentary Secretary of the Ministry of Economics.
The proposed amendments include several key improvements. Firstly, insurance contract terms intended for private individuals must be written in plain and comprehensible language, as much as possible based on the principles and guidelines for plain language developed by the International Organization for Standardization (ISO). Secondly, the insurer must ensure that the policyholder has reviewed the contract terms before the agreement is concluded—regardless of where or how the contract is signed.
Additionally, it is clarified that an insurance contract consists of a set of documents, including the insurance policy, the contract terms, and any approved amendments or supplements. The draft law also stipulates that both insured and uninsured risks must be clearly stated in the insurance policy, and any exclusions—cases where compensation is not paid—must be explicitly included in the contract terms.
In the event of a dispute between the insurance distributor and a private individual after the contract is signed, the distributor will be obligated to prove that the insurance product information document was indeed provided.
It is important to note that this new obligation will apply only in cases where the dispute concerns the issuance of the document, and not to all disputes between the insurance distributor and the policyholder.
A flexible approach is proposed—each insurance distributor may independently decide how to practically meet the new requirements. At the same time, it should be noted that these changes will directly affect all insurance distributors, and the associated costs will depend on the specific implementation method chosen by each company.