Policy wordings ‘too complex’ for most consumers
Research shows UK insurance documents contain so many complex sentences and phrases that eight out of 10 policyholders do not fully understand them.
Extensive use of defined terms, uncommon words and unfamiliar pronouns are other impediments, the University of Nottingham and law firm Browne Jacobson found.
“The study shows much can be done to improve the readability of policy wordings, and that there are significant benefits available for insurers that do so,” the researchers say.
“It will be interesting to see how the market responds to increased knowledge about how individuals read and understand policy wordings.”
Policyholders need to be educated to undergraduate level to easily grasp wordings, the research shows.
The least readable policy tested was meaningfully understood by only 13.5% of participants.
Policyholders routinely struggle to ascertain what is covered when given real-life scenarios.
“From the discussions we have had across the industry, there is almost universal acceptance that the current level of complexity needs to be addressed,” Browne Jacobson Insurance Partner Tim Johnson said.
“The insurance industry has a regulatory duty to ensure the information in policies and contracts is clear and expressed in plain and intelligible language.”