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The insurance language problem needs a fix

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The “problem” of insurance terminology keeps coming up in the insurance industry. It seems that each generation of employees gets tangled up in jargon, so jargon is what goes out to the public. But that confuses customers, so they promptly deep-six the messages.

For years, the industry has tried to fix this problem. One early effort was to apply the “fog index” to text. Robert Gunning, an American businessman, developed this measure of readability more than a half-century ago. It counts syllables, words and sentences and uses a formula to derive the grade level of the language. Some firms try hard to write at least at the eighth grade level but surely at no more than 12th grade level.

Many regulators like the concept of “plain English,” which means clear and concise language. The goal is to explain things in plain (read, simple) English. The Flesch Reading Ease Scale is a readability measure that many organizations use to review this. Hallmarks include using short sentences (10 to 20 words maximum) and words with no more than two syllables. Less is more.

To ensure documents are understandable, a number of carriers and large organizations have hired consumer representatives to eyeball content for comprehension before it goes out to the public. There are simple tests that can help scan for this but some firms prefer to have untainted (i.e., non-insurance-trained) consumers to do the look-see instead.

Apparently that’s not enough. In a recent interview with executives of Maddock Douglas and LIMRA, I learned that the industry still stumbles on getting through to consumers.

The two firms learned this after doing some knee-deep research. Their mission was to find out why people who value life insurance and want to own it don’t go out and buy it. We’ve already run the article based on the interview, so I won’t repeat the details here. But the top-line message is worth repeating: The researchers found that consumers get turned off by industry speak. They don’t understand terms like premium, cash value or annuity. As for death benefit, forget it.

What the industry needs to do is to use more “authentic language” to attract and engage consumers, said Maria Ferrante-Schepis of Maddock Douglas, an innovation consulting firm based in Elmhurst, Ill. Authentic language is not only layman’s language but also use of words and visuals that support understanding and interaction between customer and company. The key elements are language that is easy to understand, down to earth, memorable, positive, credible and relevant.

The interview reminded me of the way I reacted to all the “insurance words” I met when I first started writing about insurance. I kept going around asking colleagues, “What does this mean? What does that mean? Why don’t they just say it in English?”

My employer had me sit in the company library for quite a while so that I could get up to speed. Then they had me revise a training course so that people who were brand new to the business could understand it. Yes, that really happened.

Fast forward to today. I received an email from an industry newcomer who is having a similar struggle. “I find it hard to believe how information in an insurance policy is presented to customers,” he wrote. “Even for an agent, the information can be difficult to decipher.”

Bingo! Maddock Douglas and LIMRA are on to something. Time to ditch the “problem.” Time to get with the program, the authentic language program.

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Linda Koco, MBA, is a contributing editor to InsuranceNewsNet, specializing in life insurance, annuities and income planning. Connect with Linda →

  • John Olsen

    Linda, I agree that most insurance policies are very hard for a consumer to understand. The language in many companies’ policies has gotten much clearer in the past two decades or so but it’s still mostly Greek to many readers. I believe that this condition is due to several factors:

    1. Inertia. “We’ve always done it that way and we’re doing just fine”.

    A fine epitaph for the manufacturer of buggy whips.

    2. Fear of cost. “It would cost us MILLIONS to change that language in our policies and then file the revised language with each state!”

    Yes, There’s always an initial cost to improvements. But do you want to find yourself the only player in a game who didn’t adopt improvements?

    3.“Courts know what the present language means”. I recall a dust-up in the life insurance industry, forty odd years ago, over the difference between an “accidental death benefit” and an “accidental means death benefit”. (Did the insured INTEND to hop off that ladder from the second step, which caused him to trip, fall, hit his head on that rock, and die?)

    Yes, I can see that when the issue is the meaning of a new contractual term (or one which you’ve recently re-defined), decades old cases that you may wish to cite as precedents might not have addressed directly your new language. But that has always been the case. Legal language follows invention; it doesn’t precede it.

    4. “Look, the language is complex because these policy provisions are complicated. You can simplify the complex only to a point, beyond which you’ll over-simplify and mis-communicate”.

    Quite right about the dangers of over-simplification (we’ve seen that in too many articles by financial journalists [present company excepted, Linda]). But do those provisions have to be so complicated? Could the cost/benefit result not be achieved through simpler mechanisms? (Did your product designers even ask that question?]

    I recall looking, a few years back, at an index annuity “lock in” feature with my friend and partner Jack Marrion (who knows more about these products than anyone I know). We spent over twenty minutes examining the descriptions of this feature in the sales brochure and the actual contract before concluding that neither of understood how the darned thing worked. WHY would any product manufacturer offer as a BENEFIT something that even an annuity expert cannot understand? (Not incidentally, that feature is absent from that insurer’s current inventory).

    Linda, I applaud your call for greater clarity in insurance language. We could start with simple consistency. How about if every insurer would use “Life Only — No Death Benefit” as the label for an annuity payout arrangement in which payments cease upon the death of the annuitant, no matter when that occurs? Or perhaps, if “death benefit” is too obscure (and I’m not sure that it is), “no payment to beneficiary”?

    But not all current terminology is overly complicated or obscure. Frankly, I can’t think of an improvement upon “Life with 10 Year Certain” that isn’t a lot less concise. Perhaps some reader of this response can do so.

    Anyway, Linda, thanks for sharing your insights with the rest of us.

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