The Australian Securities and Investments Commission (ASIC) wants to make life insurance statements of advice (SOA) shorter.

“SOA that are too long and difficult to understand detract from customer engagement and may lead to poor decision-making,” the regulator says in a discussion paper.

“They are also contrary to the requirement for clear, concise and effective disclosure.”

ASIC research has shown a person must be educated to a grade-eight level – about 15 years old – to understand an SOA.

“Experts in readability scores advise documents with a public audience should have a grade level of eight or below,” the paper says. “The test [used] measures readability only by reference to the average length of sentences and average number of syllables in words used.

“It does not take into account the subject matter of the document or the way information is structured and presented.”

ASIC wants technical words and phrases replaced with commonly understood terms.

Where legal terms are used, they should be explained early in the SOA, and use of acronyms and abbreviations should be minimised.

ASIC also wants short, simple sentences, with tables and bullet points to provide information in a clear way.

The regulator accepts some information must be repeated in different sections of the SOA because people do not read them in their entirety.

It expects advisers to talk clients through the SOA, rather than just handing it over.

ASIC Deputy Chairman Peter Kell says the purpose of an SOA is to deliver important information on advice received.

“We welcome feedback that will help advisers achieve this objective,” he said.

“The SOA should not be designed as a mechanism to protect advisers against liability or a compliance tool.”

Feedback on the discussion paper closes on July 31.