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Degree needed to grasp insurance policies, research finds

Degree needed to grasp insurance policies, research finds

Insurance policies are proving too complex to understand for nearly 9 out of 10 UK adults, according to academic research.

The analysis, 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 small and medium business market.

Although the sample size for the project was small - 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 - it used in-depth analysis of people's experience reading insurance policies.

These included 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.

The results concluded some policy wordings would not be readily understood by 87 per cent of the UK population and that most policies required people to have been educated to at least undergraduate level for them to be easily understood.

Dr Kay Snowley, business development manager from LiPP, said: “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.”

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 of each policy.

Follow-up analysis of the re-drafted policies found the reading age of the most complex contracts was reduced from postgraduate level down to that of an average year-8 pupil, which is 12 to 13-year-olds.

As a result, the policies could now be understood by 89 per cent of the population as opposed to only 13 per cent – making an increase of over 40m people in the UK alone.

The research 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 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.”