Life insurance policy is the first of its kind to be designated as a “simple” product
A new life insurance policy being sold by Barclays and underwritten by Aviva has become the first product of its kind to be classified as “simple” by the British Standards Institution. Last year, the Bank of England issued a report regarding the need for simplistic products within the financial services sector. Typically, many insurance products are difficult to understand because of their complex nature. This can make it difficult for people to find the right policies for them.
Simplicity is needed to guard against consumer confusion in the insurance market
The complexity of insurance products is something of a problem for the general market. These products are often difficult for someone without a significant history in the insurance industry to understand because they cover so many issues, many of which are legal. If consumers cannot understand the terms of insurance products, finding the best policy for their particular needs can become a very difficult issue. Ensuring that policies can be easily understood may help provide more protection to consumers.
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Standards aim to dissipate confusion and make it easier for consumers to understand insurance
In order to guard against consumer confusion, the British Standards Institution has modeled its simplicity standards after the standards that govern term life assurance. The standards are meant to encourage simplicity and make it possible for certain products to be easily understood by those with limited or no experience in the insurance industry. As consumer confusion dissipates, certain issues regarding claims are likely to be resolved.
Confusing policies can cause financial problems for consumers and insurance companies alike
Confusion can cause problems with claims at times. Complicated insurance policies are difficult to understand and policyholders can become confused about what is actually being covered by their insurance plan. In the event of a catastrophe, they would file a claim as normal, but would find that their policy does not offer coverage for damages being claimed. This confusion can lead to significant financial stress for policyholders that are not familiar with insurance issues.