The Insurance Council of Australia (ICA) is working on a “detailed action plan” to improve the communication of product disclosure statements (PDS) to consumers.

It follows the release of a 63-page report by ICA’s Effective Disclosure Taskforce, which concludes general insurance PDSs in their current format fall short in communicating key details to policyholders.

All 16 recommendations made by the taskforce, including carrying out market research to understand consumers better and guide efforts to improve PDSs, will be taken up by ICA.

“We intend to implement the bulk of the taskforce’s recommendations over the next two years,” GM Communications and Media Relations Campbell Fuller told insuranceNEWS.com.au.

“Many of the recommendations can be tackled straight away, including the comprehensive research ICA will lead.”

He says the report and its recommendations “should be seen as setting in train an ongoing process of improving the effectiveness of general insurance disclosure”.

Consumer Action Law Centre Senior Policy Officer David Leermakers told insuranceNEWS.com.au implementation of the recommendations "will put us in a better place than we are now".

"I think everybody accepts that the way we do disclosure now simply doesn’t work. We need to make a change and what the taskforce report does is lay down what the next steps are."

ICA has been in “preliminary discussions” with the Australian Securities and Investments Commission (ASIC) to improve the way insurers can provide consumer advice, which is among the taskforce’s recommendations.

“ASIC has been receptive to engaging further with the industry on potential improvements to its guidance,” Mr Fuller said. “We have a strong working relationship with ASIC, and preliminary discussions on this issue have already occurred.” 

The regulator says it welcomes measures that will improve consumers’ understanding of home insurance products before they commit to a purchase.

“ASIC is keen to work with industry to consider what, if any, barriers exist to the provision of financial product advice to consumers over the telephone, and whether there is any scope to review any of these barriers to enhance the ability of insurers to provide advice to consumers purchasing home insurance,” a spokesman told insuranceNEWS.com.au.

The Too Long; Didn’t Read report is mostly critical in its assessment of the way product disclosure is communicated to consumers, who in many cases are not familiar with the jargon and technical terminologies used by the industry.

“While disclosure currently serves a range of purposes, the taskforce considers that the primary objective of disclosure should be to help consumers purchase a general insurance policy appropriate to their needs,” the report says.

“The taskforce considers that a major shortcoming in the disclosure regime has been its sole focus on the provision of information, without the necessary regard for the consumer’s ability to make use of that information.”

Also see ANALYSIS