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21 Oct 2018

Exclusive: the insurance policy small print that baffles readers

Are you educated enough to understand your insurance policy?

The small print on an average insurance policy document is harder to understand than Stephen Hawking's A Brief History of Time or Dostoevsky's Crime and Punishment, Which? research shows.

We took 40 policy documents from the 10 largest car, home, pet and travel insurers and used readability tests to check what level of education a reader would need to understand them.

The exercise revealed the average policy document required a university-level of reading proficiency - worrying considering almost half (43%) of adults have a reading ability of GCSE grade C or lower.

Here we reveal how insurance policy documents compare to major works of literature for readability, assess how easy the policies of six major providers are to use and why insurers need to take action on our findings.

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Small print struggle

In the past Which? has highlighted the similarities in word counts between T&Cs and major works of literature. But we took this analysis a step further this year with readability software that determines the complexity of words and sentences.

We used five readability tests; Flesch Kincaid, Gunning Fog Index, Automated Readability Index, Simple Measure of Gobbledygook and the Coleman Liau Index - to estimate the reading level of the language in 40 insurance policy documents (excluding text in the tables) and compared this to nine other types of texts.

Here's the level of education you would need to understand the texts we looked at with ease.

Crime and Punishment is a text suitable for secondary-level reading abilities while A Brief History of Time requires sixth-form capability. But in our analysis insurance T&Cs need a university-level of education to make sense of.

It's worth noting that readability testshave some limitations as they don't factor in pictures which can aid understanding or the actual complexity of the subject matter.

So A Brief History of Time may be less digestible than the subject matter of an insurance policy document, even if it has been put more succinctly. Nonetheless, the language and complex sentence structure could be enough to put people off reading these important documents.

Testing usability

In a separate investigation, Which? also put three home and three travel policy insurance documents to the test on how practical they were to use, to analyse areas we couldn't measure with the readability tests such as ease of cross-referencing.

We asked 24 participants to read two policy documents each and answer a number of questions based on a range of scenarios such as how to make a claim, when to report a change in health and cover limits.

Each of the six policy documents were reviewed by eight participants who had to answer eight questions for travel insurance and six questions for home insurance.

On average participants answered five out of 16 incorrectly when reviewing travel insurance policy documents - no one was able to score full marks.

Our participants found the home insurance policies easier to digest with just three out of 12 questions answered incorrectly - but just four people scored full marks.

While the error rate is not catastrophic we think insurance policyholders should be able to correctly answer 100% of questions every time.

The hardest questions our volunteers found to answer on travel insurance policies was when to report a change in health, with participants failing two-thirds of the time.

While for home insurance it was whether contents cover was extended at Christmas, with the question answered incorrectly almost nearly half of the time.

What do the insurers say?

Which? contacted the six insurers used in the usability tests.

Direct line expressed concerns with the small size of the group we used to test the different documents.

Direct Line, Insure & Go and Santander told us the information provided in policy documents is complemented by assistance from their customer support services.

Axa and Santander also told us they'd take our feedback on board, with the latter telling us: 'the scenarios offered by Which? Have been a helpful indicator of where the language may be simplified for use in future.'

Why insurance policies need to be clear

Insurance policy documents are difficult to get right.

They need to describe what you are and aren't covered for and include a range of scenarios without being too long.

They also need to comply with industry regulations and standards - but crucially they need to be easy to understand by non-experts.

When you buy a policy you'll get a lot of paperwork to read through including a policy schedule, key facts document, terms of business and the policy wording booklet.

The policy wording gives details of your insurer's obligation under the contract as well as your own.

But in our tests volunteers with legal training, computer specialists and even a retired insurance professional struggled to understand this important document.

An IT analyst described one document as a 'forest of text, while a solicitor said the language in another was 'tortuous'.

One participant said they felt a document they tested was written for 'lawyers and solicitors' not for 'everyday people'.

The consequences of not fully understanding the cover and limitations of your policy can be severe as you may be rejected when trying to make a claim - leaving you potentially thousands of pounds out of pocket.

How to cut through the gobbledygook

It's important to take some time to read through the insurance policy booklet to understand the key terms and conditions before buying the cover.

If you aren't prepared to read it all, pick out the key features that attracted you to the policy in the first place and make sure you're actually getting what you want.

You should refer to the glossary for any frequently used terms you aren't familiar with and even those that sound self-explanatory like 'accidental damage' as these can have very specific meanings when it comes to insurance.

It's also a good idea to get to grips with an insurer's claims procedure to ensure you know what evidence you will need to make a claim and reporting a problem in good time.

If you have a question about your policy and can't glean an answer from your policy document, don't make assumptions; call your insurer to get a clear answer and get them to confirm this in writing.

What to do if you've been caught out by the small print

If your insurer turns down a claim for a reason you think was unclear in the terms and conditions you can complain.

If you are unhappy with your insurer's response you can take your complaint to the Financial Ombudsman Service (FOS).

'Unclear policies have devastating consequences'

Which? believes policyholders should be able to answer all questions they have about a policy correctly, as any errors or misconceptions could leave them thousands of pounds out of pocket if they think they are covered when they're not.

Ceri Stanaway, Which? Money editor said: 'Millions of insurance policies are bought every year, so it is worrying the policy documents are often far too complex for the average customer to understand, as our investigation suggests.

'Unclear insurance policies can have devastating consequences for customers, who could see their cover invalidated due to a misunderstanding.

'Customers can use their insurer's glossary to make sense of complex terms, and should give their insurer a call if something is unclear, however, we want to see all insurance providers taking steps to cut out the jargon and make their policy documents easy for customers to get to grips with.'

Additional reporting by Dean Sobers and Josh Robbins. Read the full investigation in November's Which? Money magazine.