Skip to main content
The Actuary: The magazine of the Institute and Faculty of Actuaries - return to the homepage Logo of The Actuary website
  • Search
  • Visit The Actuary Magazine on Facebook
  • Visit The Actuary Magazine on LinkedIn
  • Visit @TheActuaryMag on Twitter
Visit the website of the Institute and Faculty of Actuaries Logo of the Institute and Faculty of Actuaries

Main navigation

  • News
  • Features
    • General Features
    • Interviews
    • Students
    • Opinion
  • Topics
  • Knowledge
    • Business Skills
    • Careers
    • Events
    • Predictions by The Actuary
    • Whitepapers
    • Moody's - Climate Risk Insurers series
    • Webinars
    • Podcasts
  • Jobs
  • IFoA
    • CEO Comment
    • IFoA News
    • People & Social News
    • President Comment
  • Archive
Quick links:
  • Home
  • The Actuary Issues
  • June 2018
06

Eight out of 10 people do not understand insurance policies

Open-access content Friday 8th June 2018 — updated 5.50pm, Wednesday 29th April 2020

Insurance contracts are too complex for eight out of 10 policyholders in the UK and require at least an A-level education to be understood, a new study has found.

2


Linguistic experts at the University of Nottingham (UON) analysed a number of policies before using eye-tracking technology and other tests to determine how difficult they were for participants.

They concluded that some policy wording would not be readily understood by 87% of the population, with most only comprehensible to those that have graduated at doctorate level.

However, it was found that re-drafting the most complex policies could make them coherent to the majority of Year 8 pupils, boosting the percentage of people that understand them from 13% to 89%.

"Each finding shows that with a little alteration, over time, the overall readability and understanding of these documents can be improved," UON business development manager, Kay Snowley, said.

"Drafting a perfectly worded policy document is virtually impossible, but what our research proves is there clearly is a lot that can be done to improve how they are currently written."

The study was carried out by experts at the UON's Linguistic Profiling for Professionals unit in partnership with insurance law firm Browne Jacobson, and involved 27 participants.

The researchers analysing policies aimed at small businesses, and used advanced imaging software to track every movement of the participants' eyes as they moved across each contract.

It was found that the extensive use of uncommon or low frequency words and phrases was a common barrier that prevented policies being understood, as was complex sentences and paragraph structures.

The use of unfamiliar pronouns, extensive use of defined terms, and overly-long sentences were also barriers, with the researchers finding that re-wording the policies could make them coherent to 40 million more people.

"The insurance industry has a regulatory duty to ensure the information in policies and contracts is clear and expressed in plain and intelligible language," Browne Jacobson insurance partner, Tim Johnson, said.

"Failure to do so could not only make them harder to sell, but leaves the industry vulnerable to legal challenge from policyholders and the real possibility of further regulatory intervention."


Sign up to our free newsletter here and receive a weekly roundup of news concerning the actuarial profession

This article appeared in our June 2018 issue of The Actuary .
Click here to view this issue

You may also be interested in...

2

Looming 'carbon bubble' set to spark global financial crisis

An imminent fall in demand for fossil fuels could trigger a global financial crisis greater than the one seen in 2008, wiping trillions of dollars off the global economy.
Thursday 7th June 2018
Open-access content
2

FTSE350 pension deficit cut by almost a third in one month

The combined pension deficit of the UK’s 350 largest companies fell by a whopping £16bn in May, with the gap between assets and liabilities now standing at £34bn.
Thursday 7th June 2018
Open-access content
2

ACA charity golf day

The ACA Charity Golf Day is being held on 10 September at West Hill Golf Club, one of the country’s ‘Top 100’ courses. The event is open to actuaries in membership of the ACA and beyond.
Wednesday 6th June 2018
Open-access content
2

Service sector activity hits three-month high

Business activity across the UK’s service sector has hit the highest level recorded since February, with the economy predicted to bounce back after a disappointing first quarter.
Tuesday 5th June 2018
Open-access content
2

Two-thirds of top workplace pension providers risk supporting chemical warfare

Six of the UK’s nine largest automatic enrolment pension providers have no policy preventing investments in firms that profit from chemical and biological weapons
Monday 11th June 2018
Open-access content
2

Three in four financial services firms remain confident about next 12 months

Three-quarters of financial services firms in the UK believe their prospects will improve over the next year, despite many growing tired at delaying expansion plans due to Brexit.
Tuesday 12th June 2018
Open-access content

Latest from June 2018

2

Motor insurer's profits hit a more than two-decade high

Rising premiums and falling injury claims saw the UK’s motor insurance market record higher underwriting profits last year than at any point since 1994.
Friday 29th June 2018
Open-access content
2

Just one-quarter of trustees confident in consolidating DB pension schemes

Only a quarter of defined benefit (DB) pension scheme trustees in the UK would feel comfortable deciding whether consolidation into a ‘super fund’ makes sense or not.
Thursday 28th June 2018
Open-access content
2

FTSE 350 firms look set to miss 2020 targets for women on boards

FTSE 350 companies will need to give around 40% of all new leadership roles to women over the next two years if they are to meet targets for female representation on boards by 2020.
Wednesday 27th June 2018
Open-access content

Latest from small_opening_image

2

COVID-19 forum for actuaries launched

A forum for actuaries has been launched to help the profession come together and learn how best to respond to the deadly coronavirus sweeping the world.
Wednesday 25th March 2020
Open-access content
2

Travel insurers expect record payouts this year

UK travel insurers expect to pay a record £275m to customers this year as coronavirus grounds flights across the world, the Association of British Insurers (ABI) has revealed.
Wednesday 25th March 2020
Open-access content
2

Grim economic forecasts made as countries lockdown

A sharp recession is imminent in the vast majority of developed and emerging economies as the deadly coronavirus forces businesses to shut down across the world.
Tuesday 24th March 2020
Open-access content

Latest from inline_local_link

2

COVID-19 forum for actuaries launched

A forum for actuaries has been launched to help the profession come together and learn how best to respond to the deadly coronavirus sweeping the world.
Wednesday 25th March 2020
Open-access content
2

Travel insurers expect record payouts this year

UK travel insurers expect to pay a record £275m to customers this year as coronavirus grounds flights across the world, the Association of British Insurers (ABI) has revealed.
Wednesday 25th March 2020
Open-access content
2

Grim economic forecasts made as countries lockdown

A sharp recession is imminent in the vast majority of developed and emerging economies as the deadly coronavirus forces businesses to shut down across the world.
Tuesday 24th March 2020
Open-access content

Latest from 06

2

Motor insurer's profits hit a more than two-decade high

Rising premiums and falling injury claims saw the UK’s motor insurance market record higher underwriting profits last year than at any point since 1994.
Friday 29th June 2018
Open-access content
2

Just one-quarter of trustees confident in consolidating DB pension schemes

Only a quarter of defined benefit (DB) pension scheme trustees in the UK would feel comfortable deciding whether consolidation into a ‘super fund’ makes sense or not.
Thursday 28th June 2018
Open-access content
2

FTSE 350 firms look set to miss 2020 targets for women on boards

FTSE 350 companies will need to give around 40% of all new leadership roles to women over the next two years if they are to meet targets for female representation on boards by 2020.
Wednesday 27th June 2018
Open-access content
Share
  • Twitter
  • Facebook
  • Linked in
  • Mail
  • Print

Latest Jobs

Shape the Future of Insurance

London (Central)
£ excellent package
Reference
149090

Senior Pricing Actuary - Life Reinsurance

London (Central)
£ excellent
Reference
149089

Insurance Investment Leadership Opportunities

Flexible / hybrid with 2 days p/w office-based
£ dependent upon experience
Reference
149088
See all jobs »
 
 
 
 

Sign up to our newsletter

News, jobs and updates

Sign up

Subscribe to The Actuary

Receive the print edition straight to your door

Subscribe
Spread-iPad-slantB-june.png

Topics

  • Data Science
  • Investment
  • Risk & ERM
  • Pensions
  • Environment
  • Soft skills
  • General Insurance
  • Regulation Standards
  • Health care
  • Technology
  • Reinsurance
  • Global
  • Life insurance
​
FOLLOW US
The Actuary on LinkedIn
@TheActuaryMag on Twitter
Facebook: The Actuary Magazine
CONTACT US
The Actuary
Tel: (+44) 020 7880 6200
​

IFoA

About IFoA
Become an actuary
IFoA Events
About membership

Information

Privacy Policy
Terms & Conditions
Cookie Policy
Think Green

Get in touch

Contact us
Advertise with us
Subscribe to The Actuary Magazine
Contribute

The Actuary Jobs

Actuarial job search
Pensions jobs
General insurance jobs
Solvency II jobs

© 2023 The Actuary. The Actuary is published on behalf of the Institute and Faculty of Actuaries by Redactive Publishing Limited. All rights reserved. Reproduction of any part is not allowed without written permission.

Redactive Media Group Ltd, 71-75 Shelton Street, London WC2H 9JQ