Editor's rant
It's good to see in these times of insurer belt tightening that the Insurance Council of Australia is doing its bit to invigorate the economy by commissioning a survey to prove that the earth is round.
Announcing its 'cutting-edge consumer research' the press release informs us that 'insurers will explore new strategies and tools for providing policy information based on the findings of a ground-breaking study into how consumers buy insurance'.
What were the results of this 'ground-breaking' study? That customers don't read/understand the PDS or exclusions to their policy, (which aren't generally pointed out to them at the policy purchase point). And, now, are you all sitting down? That they choose a policy mainly on price. Who'd a thunk it?
In addition, only those who have been burned making a claim that has been denied bother to check out policy exclusions next time around.
The research was a key recommendation of the Insurance Council of Australia’s Effective Disclosure Taskforce (I say nothing), which noted a lack of evidence about how consumers made decisions on which policies to buy. So, now, they have proved, empirically what billions of insurance customers around the world already know.
ICA CEO Rob Whelan said the research would enable insurers to better help customers find the most appropriate policies for their needs
“Insurers want to make the policy information they provide clear, simple and easy to navigate. The Product Disclosure Statement (PDS) is the key means of doing this. Unfortunately many customers find these legal documents too long and complex,” Whelan said.
Could this be because PDS statements are written in a version of English tantalisingly close to what ordinary mortals can understand but just out of comprehension to anyone outside of the legal and insurance industries? Perhaps those dedicated people who have ploughed through the Russian greats such as War and Peace and Crime and Punishment or who used to read the telephone directory for fun might feel up to investing the time and resources to soak up every addendum - but they are a rare breed I'm sure you'll agree.
“Presenting information that is more engaging, useful and relevant requires a better understanding of how customers use insurance documents and other information sources at the moment. That is what this research provides.
“Insurers can now use these findings to develop practical tools, introduce innovative technologies and design new strategies to improve how they engage with their customers.
“No single method works for everyone, and insurers may try various approaches with a range of products to engage different types of consumers.”
Does this mean instead of getting dizzy scrolling down to the PDS tome on a PDF to eventually, while risking repetitive strain injury, get the the 'where do I sign' bit, we'll have cartoons depicting what might be covered in a certain situation or, even better, memes? I'm not holding my breath.
The research, undertaken by The Lab and Nature, confirmed that most customers (about 80 per cent) don’t read the legally mandated PDS before purchasing a policy.
Other key findings included:
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Consumers focused most on price when buying insurance, rather than policy detail
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Most consumers believed they had considered all of the details when buying insurance, even though most do not look into policy exclusions and limits
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Policy renewal letters were the most trusted and commonly used document for insurance customers
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While most consumers (88 per cent) were confident they understand the detail of their policy, actual understanding of policy exclusions and limits were poor
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Many consumers do not consider the specific risks they need to cover when purchasing insurance
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Policyholders who had previously made claims were typically better informed, and more likely to read the PDS.
“The importance of policy renewal letters to existing customers presents an opportunity to provide more focused information. Online quotes might be used to more effectively reach first-time purchasers.”
Whelan said it was crucial that consumers understood the features of the policies they were buying, rather than simply focusing on price.
“Customers are exposed to dozens of brands offering multiple policies that differ on price and features. Finding the most appropriate one can sometimes be challenging,” he said.
“If a customer doesn’t understand a policy’s exclusions and limits or buys the wrong level of cover, they can end up financially devastated. For insurers, these situations create angry customers, bad publicity and costly disputes. It’s in everyone’s interest to avoid misunderstandings.”
If the ICA were to cross my palms with silver I could come up with a revolutionary policy document that says: “This policy covers you for these events, not these events. If you want more than a basic insurance policy then you'll have to pay more.” Heresy? I know, I won't give up the day job.