Only 17 % of Lithuania’s investment life insurance (ILI) holders actually understand the product they bought. The Bank of Lithuania says 39 % of mystery shoppers were offered an unsuitable ILI product, and insurance agents earn commissions of up to €770 per contract — nearly 4× the EU average. With those numbers in hand, the Seimas Budget and Finance Committee debated whether ILI is regulated tightly enough.
Some 432,000 Lithuanians hold an ILI policy — more than double the number of people in Pillar III pension funds. Most were sold the product through an agent whose income depends directly on commission. Below is what that means in practice, what amendments the central bank proposes, and what to check if you already hold an ILI contract.
The Seimas Budget and Finance Committee (chaired by Algirdas Sysas) reviewed ILI regulation. The Bank of Lithuania has proposed capping commissions tied to contract count, mandatory product suitability assessments, and a mandatory written recommendation before signing. The committee asked the Ministry of Finance to evaluate the proposals.
- 432,000 – Lithuanians who hold an ILI policy.
- 29,000–50,000 – new contracts signed each year.
- 17 % – holders who understand the product.
- 39 % – mystery shoppers offered an unsuitable product (Bank of Lithuania, 2023).
- 67 % – of new ILI contracts sold via commission-paid agents.
- up to €770 – commission per contract (about 4× the EU average).
What is investment life insurance?
Investment life insurance (ILI) bundles two services: life insurance and investment. The customer pays premiums; part covers insurance risk, the rest is invested in selected funds. Investment returns (and losses) depend on financial markets and fall on the customer — not the insurer.
ILI is often presented as “an investment with life insurance attached,” but its structure is significantly more complex than a deposit, an equity fund, or a Pillar III pension. It carries multiple fees — administration, management, insurance risk, and sometimes early-termination charges. It is precisely this complexity that the Bank of Lithuania has repeatedly flagged: many customers do not understand what they actually bought.
What problems did the Bank of Lithuania find?
At the committee meeting, the Bank of Lithuania presented several specific data points pointing to structural imbalances in the market:
- Only 17 % of ILI holders understand how their product works — meaning 5 out of 6 clients cannot accurately state the fees, what is invested, or their actual return.
- 432,000 Lithuanians hold an ILI policy; for comparison, only 196,000 participate in Pillar III pension funds. ILI has reached mass scale.
- 29,000–50,000 new contracts are signed each year.
- In a 2023 mystery shopper study by the central bank, 39 % of mystery shoppers were offered an unsuitable ILI product — for example, mismatched to their stated investment horizon, risk tolerance, or financial situation.
- 67 % of new ILI contracts are sold by insurance agents whose income depends directly on commission.
- Commissions per ILI contract reach up to €770, while the EU average is roughly four times lower. This means an agent has a strong financial incentive to push ILI even when it isn’t the best fit for the customer.
But here’s the deeper concern — committee chair Algirdas Sysas emphasised that these structural issues are exactly why stricter regulation is being weighed: to protect consumers, especially those who trust an agent’s recommendation rather than dig into the product details themselves.
The proposed Insurance Law amendments
The Bank of Lithuania has put forward three core proposals:
| Proposal | What changes |
|---|---|
| Commission cap | Limit agent commissions tied to the number of signed contracts so the agent has no incentive to “sell at any cost”. |
| Mandatory suitability assessment | Before offering ILI, the customer’s financial situation, investment goals, risk tolerance and knowledge must be assessed. |
| Mandatory written recommendation | The customer must receive a written explanation of why this specific product fits their situation. |
The committee asked the Ministry of Finance to evaluate the proposals. No final decision yet — the proposals must be drafted as an Insurance Law amendment and submitted to the Seimas.
What to check if you already hold an ILI policy
If you already hold an ILI policy, here’s a step-by-step review to find out whether it suits you:
- Find the contract and Key Information Document (KID). The KID is mandatory.
- Check the fees. Look at administration, management, insurance-risk, and premium-allocation fees. Total annual cost (TER) can reach 3–5 %.
- Compute actual return. Compare premiums paid to the current contract value. A negative gap after several years is a serious signal.
- Check early-termination terms. Some contracts impose fees if you terminate during the first 5–10 years.
- Compare with Pillar III. If your goal was retirement saving, a Pillar III pension fund with PIT (income tax) relief may have been more profitable.
- Talk to an independent advisor. Preferably one who does not earn commissions on ILI sales.
Alternatives to ILI
Here’s where it pays to think wider — ILI is not the only way to combine investing with security. Common alternatives:
- Pillar III pension funds – low fees, PIT relief.
- Investment account regime – since 2025, Lithuania offers a tax-deferred investment account.
- Separate term life insurance + a separate investment fund – simpler structure, easier to compare fees.
- ETFs via investment platforms – low management fees, high transparency.
This article is informational and not personalised investment advice. Before deciding, consult a licensed financial advisor, taking your individual financial situation into account.
FAQ
Is ILI a bad product?
Not inherently. ILI can fit certain clients with a specific long-term investment goal who understand the structure. The problem the central bank highlights is not the product itself, but that it is often sold to the wrong customers because of the agent commission structure.
Can I cancel my ILI contract now?
In most cases yes, but cancellation in the first years can cost. Check your specific terms: the current surrender (buy-back) value and any termination fees.
When will the Seimas adopt these amendments?
The committee has currently asked the Ministry of Finance for an assessment. After that, the Bank of Lithuania must submit a formal Insurance Law draft to the Seimas. No exact date yet.
Will the changes affect existing contracts?
Probably not directly. Stricter regulation typically applies to new contracts. However, certain transparency provisions (information disclosure) may also reach existing customers.
How do I know if I was sold an unsuitable product?
The first signal is when the product’s risk does not match your tolerance or horizon. Example: an ILI heavy in equities sold to someone needing the money in 2 years is a clear mismatch. If you suspect mis-selling, contact the Bank of Lithuania consumer protection desk.
If you hold an ILI policy, review your contract — check the fees, see whether the product fits your goals, and ask whether simpler, cheaper alternatives would serve your retirement or long-term investment plan better.
Source: Seimas of the Republic of Lithuania, Budget and Finance Committee press release, 29 April 2026. Original announcement.