Banks and insurers are discriminating against large swathes of their customers, according to Fairer Finance
You’d need to be a post-graduate student to understand the small print on some insurance and banking products, according to Fairer Finance.
Looking at the terms and conditions of 280 documents and comparing them to a range of reading score formulae, the consumer group found that a third of all insurance policy documents were written in language that was only accessible to those educated to university level.
Around 16 per cent of UK adults have a reading age of 11 or under, but Fairer Finance said no insurance policy documents could be understood by someone with an education level equivalent to an 11-year-old in their first year of secondary school.
James Daley, MD of Fairer Finance, said: By communicating in a language that many people simply can’t understand, banks and insurers are discriminating against large swathes of their customers.
He added that not only was this unfair but it is also bad business.
if customers do not understand what they are buying, they are more likely to be disappointed. It is in everyone’s interests that companies communicate clearly with their customers, Daley pointed out.
Fairer Finance said banks and insurers need to be forced to put their documents in a language and design that enables people to understand them, and work harder to make papersno longer than they needto be. The worst examples it found ran to nearly 70, 000 words twice the length of George Orwell’s Animal Farm.
It isn’t particularly surprising then, that in a study from last year, Fairer Finance found 73 per cent of people admitted to not reading all the terms and conditions and just 17 per cent said they understood them.
A similar report from the Money Advice Service said four in five UK adults didn’t read all the fine print when they bought financial products like mortgages. Misunderstanding financial terminology cost UK consumers 21bn in a year, which works out at an average of 428 for every adult.
The group said the Financial Conduct Authority could take steps to catalyse this process by handing out fines to firms which rely on overly complicated small print.
the FCA rules say that all customer documents should be ‘clear, fair and not misleading’. For now, most companies don’t get close to passing that test, Fairer Finance said.
Our liability and indemnity expert, Simply Business’ Keith Lynn, recently put together this jargon-busting guide for key business insurance terms to help clear up some of the confusion.
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