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insurance policies prove too complex for 8 out of 10 UK policy holders to understand, new academic research reveals

5 June 2018

New research into the complexity of insurance policies using cutting-edge eye tracking technology shows they are too complex to understand for 8 out of every 10 policy holders in the UK.

The research, which was carried out by leading experts from the Linguistic Profiling for Professionals (LiPP) unit at the University of Nottingham in partnership with insurance law firm Browne Jacobson, looked at a number of building and contents insurance policies aimed at the SME market.

An initial in-depth analysis using a range of linguistic analysis techniques, including advanced imaging software coupled with high-speed infra-red cameras to allow the researchers to track every movement of the human eye as it moved across each policy, concluded:

  • some policy wordings would not be readily understood by 87% of the UK population
  • most policies required policyholders to have been educated to at least undergraduate level for them to be easily understood.

However, after some of the most complex policies had been re-drafted using a range of methods that had been identified from the study, it was possible to significantly improve the readability and comprehension of each policy. Follow-up analysis of the re-drafted policies resulted in:

  • the reading age of the most complex contracts being reduced from postgraduate level down to that of an average Year 8 pupil (12/13 year olds)
  • as a result the policies could now be understood by 89% of the population as opposed to only 13% - an increase of over 40m people in the UK alone.

Researchers also identified a number of common barriers that prevented policies from being understood. These included: the extensive use of uncommon or low frequency words and phrases, complex sentence and paragraph structures, use of unfamiliar pronouns, extensive use of defined terms and overly long sentences.

Tim Johnson, insurance partner at Browne Jacobson, said:

“To knock 10 years of education requirement off the wording was certainly more than we expected before we undertook the research.

“From the discussions we have had across the industry there is almost universal acceptance that the current level of complexity needs to be addressed.

“There is no silver bullet but we have demonstrated that through the use of a range of drafting techniques, including the use of eye-tracking software, we can significantly increase the number of people who can easily read and understand the cover they have purchased.

“The insurance industry has a regulatory duty to ensure the information in policies and contracts is clear and expressed in plain and intelligible language.

“Failure to do so could not only make them harder to sell but leaves the industry vulnerable to legal challenge from policy holders and the real possibility of further regulatory intervention.”

Dr Kay Snowley, Business Development Manager from LiPP, says: “Drafting a perfectly worded policy document is virtually impossible, but what our research proves is that there clearly is a lot that can be done to improve how they are currently written. Each finding shows that with a little alteration, over time, the overall readability and understanding of these documents can be improved.

“This isn’t just helpful for the individual but is much better for the companies issuing them. There is no benefit for there to be doubt in people’s minds as to what and how they are covered by a policy.”

The research, which was funded by the Higher Education Innovation Fund and the EU, used 27 participants with the average age of the volunteers being 34.

Read our report


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