“Read the small print” is a well known maxim in the world of consumer affairs and insurance. When it comes to claims many people don’t understand that Fully Comprehensive does not mean all risks are covered. The there’s the sheer length of the detailed Exclusions and Conditions of the insurance contract, these can go on a bit frankly. Here’s some info from Fairer Finance, which makes a good point.
But as data emerged recently that around 1 million people in Britain don’t speak fluent English, the day will come when the FCA requires insurance brands to hire translators, just like the public sector. Otherwise the contract will not be deemed binding, since the Insured didn’t understand it fully. That translation cost, which cannot always be automated via software for compliance reasons, will probably run into millions each month. Inevitably this cost will be passed onto policyholders, with some IPT on top so the government gets a cut.
The long term solution is that the public sector provides free lessons in English, not translation services, so that migrants have to learn the language to work, sign contracts, rent properties, drive safely etc. and actually interact with people outside of their immediate neighbourhood. This is what Germany, France, Spain or many other countries already do, so insurers need to campaign for EU harmonisation on this important societal cohesion point – it is not the job of private companies to help migrants integrate by offering translation services.
Here’s the word;
On World Book Day (6th March), when millions celebrate the joy of reading, Fairer Finance reveals that many insurance firms, banks, and investment companies’ terms and conditions (Ts&Cs) are so long that they rival the word count of many literary classics.
Furthermore, with over 18 months having passed since the introduction of the FCA’s Consumer Duty – which states that firms should communicate with customers not only in a way that is ‘clear, fair and not misleading’ but also to equip them with the information needed to make effective and informed decisions – the consumer group has found that the complexity of financial documents has barely improved.
Financial Ts&Cs can be as long as classic novels
Fairer Finance’s latest analysis finds that the average travel insurance and investment product Ts&Cs are 24,000 words long—the same length as Shakespeare’s Romeo & Juliet or Oscar Wilde’s The Importance of Being Earnest.
Some documents, such as the terms for Barclays Smart Investor, contain almost double the average, at over 47,000 words. This is greater than the word counts of The Great Gatsby (c47,000 words) and Animal Farm (c30,000 words).
Having examined the length of financial terms and conditions for over a decade, Fairer Finance has identified the financial products with the highest word counts. Travel insurance policies and investment terms and conditions top the list, closely followed by home insurance policies.
DECLINE IN BASIC LITERACY
On top of the foreign language as a first language issue, there has been a decline in written and spoken English for indigenous British people as well.
The National Literacy Trust reports that 16.4% of adults in England (7.1 million people) have “very poor literacy skills” classifying them as “functionally illiterate” as reading information from unfamiliar sources or on unfamiliar topics could cause them problems. These consumers with poor literacy skills are also deemed “vulnerable” by the FCA. Furthermore, the government estimates that one in seven adults in England (14.9%) has the literacy skills expected of a child aged between 9 and 11 years old.
Yet, despite this, Fairer Finance discovered that car insurance terms and conditions require the highest average reading age at 19 years on average (a reading grade of 14.5). However, there is much inconsistency within sectors. For example, the reading age ranges from 10.4 years to over 25 years among pet insurance providers’ Ts&Cs.
James Daley, Managing Director at Fairer Finance, the consumer group and ratings provider, commented:
“It’s disappointing that 18 months after the introduction of Consumer Duty, we’ve seen little progress in making financial terms and conditions clearer for customers. Too many firms still assume that no one reads the Ts&Cs, so there’s no urgency to simplify them.
“Yet the FCA’s rules make it clear that firms must ensure their customers can understand the information they’re given. Most Ts&Cs remain overly complex, excessively long, and far beyond the reading level that the average consumer can easily engage with. We’ve seen first-hand that it’s entirely possible to create clear, user-friendly Ts&Cs that still meet legal and compliance requirements. Customers rely on these documents as guides to their financial products, so they need to be well-structured, easy to navigate, and written in plain language.”
Fairer Finance has launched its new and improved Document Analyser Tool, designed to help financial services firms make their documents clearer and simpler. It is offering a free trial until the end of March 2025.
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