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Too hard to read

Can companies rely on their policy documents if there is a dispute with a client over what is covered? 

Tuesday, January 31st 2012, 8:48AM 6 Comments

Perhaps not. If the ‘average client' has a reading capability below that of, say, a university graduate, but the complexity of the language is such that only someone with higher education might be expected to understand it, then they might fairly claim that no-matter how hard they read the document, it is not reasonable to expect them to understand it.    

Unfortunately many documents are too hard to read. If the document is too hard to read, or contains confusing material, then more weight must be placed on the advice given at the time the policy is sold.

That should concern advisers as much as clients. Advisers do not currently have lengthy sections in their reports dealing with the meaning of policy wordings. They assume that the client can read the document for themselves - yet many simply cannot do that.

A well-established measurement of reading ease (Flesch) scores documents by looking at two key measures - the ratio of long words in a sentence, and the ratio of words to a sentence.

Long sentences filled with long words are harder going. It's an inverse score. 60 or more means a primary school student can understand it.

In the range of 0 to 30 a university graduate-level skills are required. I've tested lots of policy wordings over the past few weeks and found everything from scores in the 90's (really easy to read) and scores as low as 2.5 (very hard).

A general shift towards standard policy wordings has also been underway in the past decade. Many sections are standard and schedules for individual benefits can then be tacked on.

Some companies went further and simply printed all the policy wordings in the one document, and refer to the schedule. That's another practice I think is confusing. With modern systems it is a simple matter to print and deliver only the wording that's required.

If it is costs insurers are worried about then don't print it - many clients would prefer the delivery online anyway.

Consumers often don't buy what they don't understand. Insurance is a category that is already tainted with suspicion - we know from confidence surveys (such as the one commissioned by Rabobank) that consumers worry payouts will not be made. The policy document should be the first stop for clarity - but as they stand at present, many are the starting point for confusion.

If that's adding risk to your advisory business, then that means you should be concerned about it. 

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Comments from our readers

On 31 January 2012 at 11:27 am Dirty Harry said:
I disagree that this is an adviser problem. And I disagree that we just assume they can read the doc themselves - quite the opposite in fact - good advisers do something far more important; by creating the right expectations from the outset we are more likely to avoid a situation arising where the client expects a claim that ultimately isn’t there. Even if the client reads the entire document within the ‘free look’ it won’t mean a thing years later when the event comes up, no matter the simplicity of it.
On 1 February 2012 at 8:01 am Bazza said:
I am working on a case right now where a client isn't getting paid a claim due to not meeting the policy wording definitions, yet the client is pointing towards the statement of advice from the adviser which says simply 'if he can't work due to illness or injury he will be paid a benefit'. His expectations have not been met. There are 1000's of clients who at claim time would be in a similar situation. Be careful what you say especially in writing. I also agree though that policy wording isn't the easiest language to learn!
On 1 February 2012 at 11:49 am Mike said:
Bazza - OUCH! the correct qualification would, I guess, be: "if unable to work and qualifying under the terms of the policy..." yes?
On 1 February 2012 at 12:56 pm Bazza said:
Definitely a reference to the definitions and/or terms of the policy would help.
On 3 February 2012 at 1:28 pm Graeme Lindsay said:
This is a very real issue! I've been reading and analysing policy documents seriously for 18 years now and I sometimes have trouble understanding what they mean! We have situations on record when the Insco staff persons do not understand their contracts.
Bazza's point is valid! To avoid becoming a target sometime in the future, advisers should always be very careful what they put in written material! Always refer to the Policy Document in Statements of Advice. Our practice is to always include our Policy Analysis, i.e. Policy Document re-ordered in our format - in every SOA!
On 13 March 2012 at 3:59 pm Lisa said:
Re: The insurance companies that send clients all the policy wordings in the one document, and tell them to refer to the schedule.
I agree that this is very confusing to the average client - why do they insist on send information about something they (the client's )don't have cover for? If the only cover is for Life and Trauma then forget all the other products that are availalbe! When I buy a new Fridge I don't get the instructions for seperate freezer, or washing machine and dryer. Surely in this modern day the insurance companies could work it out to be easy for their paying clients.
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