The reasons for lower insurance penetration in India are multifaceted. However, one of the main factors is limited financial literacy and awareness. Typically, legalese in the policy document makes interpretation and understanding a challenge. Globally, the World Bank, OECD, and several other associations/ authorities have expressed the need for transparent communication to build consumer trust and confidence in the insurance industry. Given the current Indian demographics, the need of the hour is to simplify policy wordings to assist in greater financial awareness and aid the goal of insurance coverage for all.
India has taken commendable measures in making insurance more accessible to the public, while enhancing customer understanding and transparency within the insurance sector. Indian judicial interventions have directed insurers to prioritise simplicity in their policy wordings. The Supreme Court in United India Insurance Co. Ltd. v. Harchand Rai Chandan Lal[1], highlighted the need for meaningful policy, palatable to the common man, and not technical, as it would defeat the cause of the public at large. In this regard, the Insurance Regulatory Development Authority of India (IRDAI) introduced the Bharat Griha Raksha, Bharat Laghu Udyam Suraksha and Bharat Sookshma Udyam Suraksha, with simplified policy wordings to make insurance more accessible. The IRDAI has also introduced a simple standard life insurance product ‘Saral Jeevan Bima’, with easy to understand policy wordings and mandated all life insurers to offer the said product. Other health insurance products like Corona Kavach, Corona Rakshak, Arogya Sanjeevani and Saral Suraksha Bima also set benchmarks for simplified policy wordings.
Once again, the IRDAI has embarked on a transformative journey towards simplification of policy wordings, for which, it has set up a 12-member taskforce, with the assistance of external experts. The IRDAI has set a goal of “Insurance for All by 2047”.
Readability of any document determines its simplicity. One of the tests of measuring readability is the Flesch Kincaid readability test, which involves two tests: i.e. (i) the Flesch Reading Ease test; and the (ii) Flesch Kincaid Grade Level. The Flesch Reading Ease test measures the readability of the text. A score above 60 indicates that the text is easy to understand. The Flesch Kincaid Grade Level test indicates the basic level of education a person needs to have (ideally between 5-10th grade level) to be able to easily read and comprehend the document. It is based on factors such as average sentence length and average syllables per word. The lower the Flesch Kincaid Grade Level score is, the easier it is to read such piece of text.
The readability statistics of a popular health insurance product in India are set out below:
| Name of the Flesch Kincaid test | Score |
| Flesch Reading Ease | 28.4 |
| Flesch Kincaid Grade Level | 15.50 |
The above analysis shows that the policy document is not easy to read, implying that a layperson having basic education will find it difficult to read and understand it.
A policy should be able to communicate with its policyholder and there are several means to this end:
- the usage of visual aids to convey the critical terms of the policy;
- prioritisation of plain unambiguous language over technical jargons;
- avoiding a monotonous style and fostering personal connections by using “you” and “we”;
- usage of conditional frameworks of “if and then”;
- judicious use of headings;
- overall presentation, style, and layout.
Often, policyholders are unclear about what is and is not covered. Insurance policies should provide explicit details on the coverage (all in one place), thus mitigating misunderstandings and disputes. Exclusions may be clearly specified in the coverage section as items not covered to ensure that the reader/ policyholder does not miss reading it.
The claims filing and processing mechanism may be set out in detail, highlighting the step-by-step process as well as the checklist of all necessary information to be submitted at the time of making the claim. Examples of reasons for delay in claims processing must be mentioned to provide clarity to customers.
The grievance mechanism process must be set out clearly to ensure that the grievances of policyholders can be addressed in an efficient manner. The step-by-step process, along with indicative timelines should be set out in detail. Insurers may also consider developing a communication strategy for communicating with policyholders/ potential customers through digital platforms, print media, etc.
While the reasons mentioned above are not exhaustive, they capture some of the primary challenges that policyholders face when they try to comprehend insurance policies. Stakeholders should strive towards simplification and adopt a self-review mechanism to deliver smooth insurance experience to its policyholders. It is evident that this is an empowering stride towards a more accessible, transparent, and consumer-friendly insurance experience for all. In conclusion, we envision a future where decoding insurance policies becomes straightforward. By holding insurers accountable for transparent and accurate communication, trust and integrity can be upheld, bolstering consumer confidence and satisfaction.
[1] (2004) 8 SCC 644
