The insurance industry’s battle with jargon: The fight continues

The insurance industry has long used jargon and acronyms. However, when these seep into customer communications and documentation, they are detrimental to the goal of providing clear and understandable information so that customers can make informed decisions.

We have included a few examples below. However, the insurance industry is full of examples. 

Pre-existing conditions 

On the face of it, it may appear that a pre-existing condition for travel insurance, is a relatively straightforward concept - a health condition or injury that an insured had before they took out the policy or before their trip started, including conditions they are waiting for test results for. However, it quickly becomes complex. For example, when would previously having had back pain be a pre-existing condition? How serious would it have to be, given that most of us will have experienced some level of back pain at some point in our lives.

Medical underdeclaration is a significant challenge in travel insurance. A significant percentage of customers only declare what they are currently being treated for. Failure to declare a condition can have a material impact on a consumer, potentially invalidating their insurance and leaving them with significant financial and health consequences at a vulnerable time.

A panel at the Verisk Insurance Conference in London in September 2025 suggested that the term ‘pre-existing conditions’ in travel insurance is confusing to customers and contributes to underdeclaration of medical conditions. They said many customers do not understand “have you got any pre-existing conditions?”, which is a common feature in many proposal questionnaires. They said that instead asking five more specific questions led to more customers declaring conditions, and that this did not impact negatively on sales. 

The term ‘pre-existing conditions’ is embedded in the industry and will be difficult to remove. Suggestions included just using “medical conditions” from Tom Bishop, Head of Travel at Sompo. If insurers have a timeframe of how far back they want customers to disclose conditions that they have had, this can be specified, i.e. “medical conditions and injuries that you have had in the last 10 years”. 

Named perils 

‘Named perils’ policies cover types of losses, perils or events specifically listed in the policy document. A named perils policy only provides cover against the specific type of losses or damages set out in the policy documents.

This is a technical insurance term, which is not generally understood by customers. Without explanation, customers are unlikely to understand that this type of insurance is more restrictive than a policy that covers all risks (and not only those caused by specific listed perils). Further, customers are unlikely to understand that they are responsible for proving that the loss was caused by a listed peril.

The name 'named perils' might imply broad coverage, but it actually signifies the opposite: limited coverage that only applies to the listed items.

All risk and all perils

The terms 'all risks' and 'all perils' can also cause confusion for customers. It can create a false sense of comfort for customers. The term can imply that a policy covers a large range of potential risks. However, this type of policy can still contain lengthy and significant exclusions. Exclusions on this type of policy can remove cover for certain perils, such as earthquakes and landslides. It is important that customers understand what cover they are purchasing. 

Betterment 

The term ‘betterment’ is not commonly used outside the insurance industry. Policies often fail to clearly explain the concept to consumers. ‘Betterment’ occurs when improvements made to property exceed the original condition. The purpose of a ‘betterment’ clause is so that the policyholder is restored to the same position they were in before the loss or damage to the property, rather than a better one.

Customers often mistakenly believe their 'new for old' coverage means they can replace damaged items with brand-new ones without any additional cost. In reality, insurers apply a betterment charge when a repair or replacement improves an item's value or condition beyond its pre-damage state. This is done so that the policyholder is restored to their previous financial position and does not profit from a loss.

This is an area which is regularly misunderstood by customers. 

Replacement cost

Customers often struggle to understand ‘replacement cost’ in insurance. Most people lack the expertise and information to accurately calculate the cost to rebuild or replace their property and belongings, leading to underinsurance and potential issues when making a claim. Many consumers do not have a clear picture of replacement values, which can be influenced by factors like location, age and labour costs. Customers often confuse ‘replacement cost’ with market value. 

The Financial Ombudsman Service has noted that underinsurance complaints often stem from customers' difficulty in determining these costs.

What this means for insurers 

Insurers should evaluate terms, including those that have been used by the industry as standard for a long time, on whether they are actually understood by customers. 

Drafting customer communications, including policy wordings in Plain English, remains highly important following the introduction of the Consumer Duty. Despite progress in some areas, the industry still has significant scope for improvement.