Allianz Partners Australia and Youi have received certification for their Product Disclosure Statements (PDSs) from newly-launched Plain Language Contracts, which determines whether insurance contracts and other correspondence meets a “credible” standard of being understood.

Plain speaking lies at the heart of establishing trust between two parties, says co-founder John Myler, yet there is “a real challenge” in creating legal contracts that are easy to understand.

"I have seen firsthand the importance of consumers truly understanding what they are buying and observed the pain and expense this can cause families and the organisations if this is not the case,” said Mr Myler, who was formerly CEO of RACQ Insurance and Auto & General Insurance.

A new Allianz Travel Insurance PDS is the first document certified by Plain Language Contracts, while Youi achieved top gold certification for both its Car and Home Insurance PDS.

The certification methodology involves at least three independent reviewers scoring documents based on 32 different criteria, covering basics such as comprehension and spelling, through to disclosure levels, target market considerations, jargon, ambiguity, and performance against its purpose.

While use of plain language is often mandated, it has been difficult for insurers to know if they are complying, and Plain Language Contracts says it provides a simple and independent certification process for a variety of documents and online forms.

“Despite plain language being an insurance code of practice requirement, many consumers remain unconvinced,” Mr Myler said.

The Insurance Council of Australia disclosure committee previously found insurance PDSs are seen as too detailed and inaccessible, with over two thirds of consumers claiming they did not understand all the details.

Plain Language will expand to serve utilities, telecommunications and government services later in the year.