The score is in. Formal documents that insurance companies publish fail to meet reasonable benchmarks for readability.
Which means that these companies have more to do if consumers are to easily understand insurance policies and products.
In The readability scorecard: Australian insurance companies, Ethos CRS analysed the readability of 52 publicly-available documents from 26 companies. All documents fell well below the ideal benchmark score of 100. The readability scores for the documents of the 26 companies ranged between 64 and 83, with the average score being 74.3.
Because levels of financial literacy vary widely, readable content is a must for insurers.
The insurance industry in Australia on average pays out $166 million in claims each working day. In a single year, Australian insurers write 43 million business and household policies. The Insurance Council of Australia’s General Insurance Code of Practice states insurers must take reasonable steps to make sure that their communications are in plain language.
This comes at a time where Australia is increasingly subject to extreme weather events. In the last two years, since the 2019–20 Black Summer bushfires, there have been 11 declared insurance catastrophes. Insurers recorded over $13 billion in claims costs. Because the market is changing, households must be able to understand their cover – what they signed up for and what their cover provides.
The 2022 readability scorecard: Australian insurance companies recommends the insurance industry should adopt the principles of plain language and set universal readability standards. In particular, insurers should apply readability standards to the frequently asked questions webpages on their websites.
To find out more about our approach or to read the report, download your copy: The 2022 readability scorecard: Australian insurance companies (pdf)