Article on pan-baltic insurance system

The Lithuanian journal “Current Issues of Business and Law”, Vol 6, No 2 (2011), has published the article “Significance of the Principles of European Insurance Contract Law for the pre-contractual information duty: Experience of the Baltic States” (full text in English) by LEXTAL’s Attorney at Law Olavi-Jüri Luik and Attorney Magnus Braun.

This article covers the pan-Baltic insurance system and suggests the possibility of pan-Baltic insurance products. It is the first article on this topic in the Baltic States.

The authors believe that the current differences of the Estonian, Latvian and Lithuanian insurance legislation as regards the pre-contractual obligations of the policyholder and the consequences of a breach of these obligations preclude the introduction of pan-Baltic insurance products. Implementation of the PEICL would allow cross-border insurers to provide consumers cross-border services on the Baltic insurance market as the barriers caused by different legal systems would be removed. The authors hold that the PEICL will significantly alter the scope of the policyholder’s obligations in the Baltic States. As regards the pre-contractual information duty, potential implementation of the PEICL will affect Latvian policyholders the least. However, the situation of Estonian policyholders will improve significantly as policyholders no longer must adhere to the so-called rule of own initiative or the standard terms and conditions of the insurer if the insurance contract is entered into under the PEICL. The most significant change upon the potential implementation of the PEICL will be that if the insurer withdraws from a contract, it terminates within one month after receipt of a notice to that effect. In addition, the deadline by which the policyholder must respond to a breach of the information duty will be shortened to one month in Lithuania. In Latvia, this deadline will be extended to one month, instead of the current 15 days, the policyholder will also have one month to agree to change the contract. Under the insurance law of Estonia, Latvia and Lithuania, the potential implementation of the PEICL will bring along only minor changes to the situation related to the policyholder’s breach of the pre-contractual information duty ex post after an insured event. The regulation of the fraudulent breach of the policyholder’s pre-contractual information duty will change significantly. As far as the insurer is concerned, the PEICL is much more flexible and allows more options for action in a situation where the policyholder has committed fraud in relation to the insurance contract. The situation of Latvian policyholders will become less burdensome because, if the PEICL is implemented, the insurers will no longer be able to invoke gross negligence in providing information in the pre-contractual negotiation phase.

Olavi-Jüri Luik
Magnus Braun