Limitations of German Insurance Disclosures to Improve Consumer Understanding, With Lessons for U.S. Insurance Practices
Journal of Insurance Regulation, 2016
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Last Updated 9/20/18
Issue: Insurance regulators have recognized the difficulties consumers encounter when seeking personal lines insurance coverage and are researching whether the consumer is given enough information to make comparative decisions regarding the differences in the personal lines policies offered by various insurance companies.
Overview:Consumer advocates have argued that not all homeowners' policies offer the same extent of coverage. They have also contended that the quality of the coverages offered can differ from policy to policy. Additionally, the advocates have maintained that consumers are unable to reasonably evaluate an insurance policy because the policy is not available to the consumer until after the policy has been purchased. Advocates maintain that neither brokers nor agents have access to the policies they are selling which signifies that they are unable to review the extent of disparities in the coverages.
Opponents disagree with the public dissemination of the policies and argue that many consumers do not actually read their policies in full. They also maintain the position that homeowners insurance is complicated as policies are subject to a state's regulations, which are not all the same. Opponents also contend policyholders can request various amendments or endorsements to their insurance contract, which adds confusion to comparison shopping.
Status: In 2010, the NAIC formed the Transparency and Readability of Consumer Information (C) Working Group to review the controversies surrounding the issues of transparency and readability. The Working Group has compiled the following documents, which have been adopted by the Property and Casualty Insurance (C) Committee, and the Executive (EX) Committee and Plenary:
The consumer shopping tools explain how to purchase homeowners insurance and personal auto insurance. Both shopping guides include questions for consumers to ask their agent before purchasing insurance, a list of possible discounts, as well as a tool which provides coverage summary information.
State insurance departments began to post insurance policies online, which required a combined effort between regulators and industry. The Working Group completed a best practices document for creating consumer online insurance policy resources. This document includes background information, department of insurance considerations, methods of data collection, identifying the scope of the project, document format considerations, web format considerations, additional information, maintenance, and sample forms.
The Working Group created a flood insurance basics document to help consumers understand the need for flood insurance and information on how to buy flood insurance, as well as some flood facts that can be used by departments of insurance in their social media campaigns regarding the importance of purchasing flood insurance.
The Working Group is examining and studying: (1) increasing consumer accessibility to different carriers' policy forms; (2) developing a flood insurance shopping tool for homeowners, renters, and business owners; and (3) ways to increase customer access to policy forms on a pre-sale basis. The Working Group will also consider insurance readability models; creating new models for disclosures; and creating best practices for online market assistance tools. The goal of the Working Group is to discuss, study, and examine a variety of options to produce workable plans that can be realistically implemented.