I was recently asked this question.
What do you think about efforts to simplify the policy language?
The answer is never as simple as it seems at first.
The simple answer is that I am in favor of making the insurances easier to read and understand, especially for the layman.
Why insurances should be easier to read.
Many of our customers are at best reluctant customers. They pay for several years for their car and homeowners insurance. They never have a requirement. They have even chosen not to claim any things and just cash them just so they did not have to deal with the hassle of filing a claim, meeting the adjuster, negotiating the value of the claim and finally getting the job done two years later.
It's even worse when they pay for their insurance for several years and when they finally file a claim the letter of denial comes in and they do not understand why the loss is not covered. To be fair, a proper written claim for denial always includes the important policy language, but when it comes to the policy language, the red hue that everything has made it very difficult to continue reading and their anger has shut off the part of the brain that controls reading and interpretation of written language.
We must always remember that our customers are people who do not do this for their living. They do not care what their auto policy says about their personal property in transit. They do not care that theft is a covered cause of loss of their homeowners policy if you do not own a temporary home as it is not covered. All they really care about is that when they call us, we answer with: “Yes, that statement is covered. Can I send a check today?
Some insurance companies and agents have created marketing materials that make the policy easy to understand and it helps, but it is not enough. I advocate for making politics easy to read and understand. Everything else in our world tends to simplify. No one uses big words unless they are academics. I can not convince anyone that they need to read classical literature anymore (Sidebar ̵
One last thought here, insurances should be easier to read because too many of my peers in the insurance world do not understand the policy better than the customer does. I sat at my insurance counter and received calls and emails from agents who asked me simple coverage questions. OK, I thought they were simple, but that's not the important part. It was not just new agents or agents with small businesses. Agents everywhere would ask questions and it seems like they would already know these answers. In short, they are so difficult that many of us do not know what they are actually saying.
Why this is harder to do than we want it to be.
If you think coverage attorneys and public adjusters, insurance policies are difficult to read just because insurance companies want to make it difficult for people to understand. Hogwash.
If you think some insurance companies are insurances difficult to read just because the coverage lawyers want to find coverage where no coverage was ever intended. Balderdash. The truth is somewhere in the middle.
The insurance we see in front of us today has many players to blame. There are enough intentional and unintentional acts to blame for these fine works of legal literary art. Keep in mind that every word in every insurance policy is reviewed either before the insurance is written or when the claims start to come in. Every word in every insurance policy has been read and re-read by lawyer after lawyer. Some to make sure the words communicate exactly what the insurance company means. Others find ways to get the policy to communicate what they want it to communicate.
You may be wondering if we can take current policies and somehow make them easier to read. We can do it, but it's not without problems. When you take a current policy and make changes to the language, you risk reinterpreting the policy based on the changes that were made. The argument would be something like "The company thought this would be less specific because they changed the wording in this way."
You may be wondering about developing a whole new policy. This has been tested by a company. You may remember the three-page commercial package policy written by a company in Nebraska. Writing a new policy has its potential pitfalls. The biggest pitfall I see is that when you draft a completely new policy, you do not know how the court will react to it. It is also difficult to anticipate all the potential challenges that politics may face. A new policy may be approved by regulators and that the approval may include notes and clarification indicating how coverage may apply, but none of this guarantees how a specific court or jury can apply the policy later.
Why it's worth continuing.
Anything we can do as an industry to make it easier is worth a try.
Anything that helps insurance grow to a place of trust in customers' minds is worth trying.
Anything that increases voluntary use of insurance products is worth trying.
In the end, it's always worth trying to improve.
The most important insurance news in your inbox every working day.
Get the insurance industry's reliable newsletter