The National Insurance Brokers Association (NIBA) says elements of the Federal Government’s proposed key facts sheet (KFS) are “too simplistic”.

Responding to a Treasury consultation paper on the draft key facts sheet, NIBA says the proposed one-page sheet won’t enable consumers to adequately compare policies to make an informed decision and could mislead them into thinking that policies which differ vastly in coverage are similar.

“The risk is that the key facts sheet as proposed will work in favour of insurers providing limited benefits, and possibly lead other insurers to reduce their additional benefits where choices made by consumers won’t (because of the KFS) be based on any consideration of all of the benefits contained in the product disclosure statement,” the submission says.

A generic description of the three main types of home and contents policy – sum insured, sum insured plus margin or total replacement – is seen by NIBA to be “too simplistic” and may give the impression that total replacement is the most appropriate policy, when this may not be the case.

NIBA says at the very least the policy types should be broken into accidental damage cover and defined/specified events cover with sub-sets for sum insured, sum insured plus margin and total replacement. And it says there should be a basic explanation so consumers are not confused.

“What we need to ensure is that consumers are not misled into making poor choices because of the key facts sheet,” the submission says, raising concerns that consumers will rely solely on the KFS to explain an insurance policy.

A key facts sheet was proposed after last year’s disaster inquiries, which showed most consumers do not read their product disclosure statement. But NIBA says in trying to condense policy information to one page, it is difficult to judge what individual consumers consider important to them.

“In many cases the basic cover will be provided at a high level but there will be qualifiers attached (in the cover section itself, definitions, exclusions, conditions or endorsements etc) that restrict the cover to less than the minimum cover,” it says.

The submission discusses the difficulty of outlining what is covered and excluded and whether there should be information on excesses. NIBA says although these are all-important to understanding the coverage, the full detail would not fit onto one page.