About 80% of consumers buy insurance without reading product disclosure statements (PDSs), and 88% are confident they understand policy details despite having a poor understanding of exclusions and limits.

That’s some of the conclusions of new Insurance Council of Australia (ICA) research into consumer attitudes that was released last week.

It follows a 2015 recommendation by ICA’s Effective Disclosure Taskforce to study how consumers buy insurance and to identify the best ways to overhaul product disclosure documents.

The research confirms price rather than a policy’s details is the primary focus when buying insurance.

It says many consumers fail to consider specific risks they need to cover, and policy renewal letters are the most trusted and commonly used document.

In a panel discussion at the ICA Forum in Sydney on Friday, lawyer Michael Gill, who chairs the taskforce, said the PDS system “was set up for failure from day one”.

He raised the possibility of standard policies for major classes, which he says could reduce the strain on consumers.

But Hollard CEO Richard Enthoven, whose companies produce a range of personal lines products, is not convinced.

“I question whether the cost/benefit would stack up,” he said. “This is a low margin industry and anything we do that increases the amount of claims we pay will result in higher premiums.

“I am open to discussion about standard wordings, but it needs to be very carefully thought out.”

ICA CEO Rob Whelan says the research will enable insurers to better help customers find the right policies.

“Insurers want to make the policy information they provide clear, simple and easy to navigate. The PDS is the key means of doing this.

“Unfortunately, many customers find these legal documents too long and complex.”

Now insurers understand how customers use insurance documents and other information, they can develop practical tools, introduce innovative technologies and design new strategies to improve customer engagement, he says.

“No single method works for everyone, and insurers may try various approaches with a range of products to engage different types of consumers,” Mr Whelan said.

See ANALYSIS