Insurance terms and conditions are becoming longer and more complex. Does this reduce the level of trust inherent in the system?

Have you ever taken time out to read the terms and conditions of an insurance policy? No? Well the chances are that’s a good thing, because according to a new piece of research many of them are long enough to be novels in their own right.

Research from Fairer Finance has turned its attention towards excessively lengthy terms and conditions which can put many good novels to shame. Its research identified many life insurance, critical illness insurance and mortgage terms and conditions which stretched to more than 25,000 words.

Aegon and Zurich were identified as two of worst offenders. Aegon’s life insurance policy is 24,758 words long which Zurich’s level protection is just over 24,100, but a few policies stretched to more than 30,000 words. In comparison Ernest Hemmingway’s novella the ‘Old Man and the Sea’ is only just over 26,000 words while Dickens’ ‘A Christmas Carroll’ is 28,000 words.

The argument from insurance companies is that these policies can be complicated. Those that provide the most comprehensive cover will also be the ones which require the most explanation. Terms and conditions may be lengthy, but customers are advised at length on the best policies for their needs.

At the same time concerns about how a provider should demonstrate regulatory compliance can lead to Ts&Cs which attempt to cover every base. However, Fairer Finance argue that in many cases efforts are unnecessary and may not be understandable for every customer.

Speaking at the recent protections conference James Daley, founder of Fair Finance pointed out that, according to figures, half the UK population has a reading age of 13 or less, which means that for many people the average policy document would be almost impossible to understand.

Such a lack of transparency makes it difficult for policies to cater to everyone regardless of their levels of reading or financial education. Reducing the length of terms and conditions and making language clearer and easier to understand would go a long way towards restoring trust in the sector.

Companies are making efforts to simplify and shorten their terms and conditions. However, they may feel that the complexity of products and the need to comply with regulations limit how much progress they can make.

With multiple departments contributing to the terms and conditions, it is hard to get a clear sense of direction. However, Daley suggested that if firms could encourage better collaboration between legal and compliance teams, it should be possible to cut much of the unnecessary bulk from the documents.

Much of this may seem to be trivial. After all, how many people ever read the full terms and conditions of a product. Even so lengthy policy documents which rival novels in their length do not give the best impression. They may add to the sense that the insurance sector is opaque and uncertainty over what will be covered and when the insurer will follow through on their obligations.

Aside from that the sheer size of these documents represents a lot of additional work and effort, all of which might be better deployed elsewhere. For the sake of their own workloads, the good of their customers and their reputation, therefore, it is worth looking at how they can project these policies in a clearer and more precise way.