David Chaplin 's Opinion

A personal finance columnist for the NZ Herald

Inside Money: Flesch test - in search of an easy hereinafterlife

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Photo / Thinkstock
Photo / Thinkstock

On my desk lie a couple of insurance policy documents awaiting due diligence (DD).

So far I have only skimmed the policy contents discovering words never seen in everyday discourse ("hereinafter") and many sentences beginning "If you...".

If I wasn't so busy I'd read these important legal documents in full.

Or perhaps, like most people, I'll trust in the glossiness of the brochure and wait until later to find out who the party-of-the-third-party actually is.

And if it's hard enough summoning up the energy to read relatively simple property-based policies, you can see why just about no-one attempts a word-for-word reading of their life insurance contracts - jam-packed, as they are, with medical jargon and exclusionist clauses.

However, a new study by Quality Product Research (QPR) , has found that New Zealand life insurers could make it a little easier on their long-suffering readers.

QPR, a firm headed by insurance consultant Russell Hutchinson, applied the internationally-recognised Flesch Reading Ease scale to policies offered by nine local life insurance companies.

The Flesch test measures sentence and word lengths, where documents scoring zero would be total gobbledygook while those achieving 100 represent peak lucidity.

According to the QPR study, four of the nine insurers scored below 45 on the Flesch scale (which, in some jurisdictions such as Florida is the minimum required for all insurance policies).
Partners Life, Tower and Sovereign had the most-readable life polices, the QPR study found.

"Four insurers have some sections of their policies that score lower than 15 making them very difficult to read," the report says. "All insurers have some sections in their policies that score lower than 30. Interestingly, it isn't all the same clauses: some companies can explain a concept much more clearly than others."

Furthermore, the study concluded product complexity was no excuse for obscure prose with one of the most complex policies being in fact "very easy to read".
Inspired by this I returned to my DD, starting with the paragraph headed, "Your responsibilities":

"You should read all your insurance documents carefully. Your policy is subject to certain conditions and if you do not comply with these conditions, we may take actions as outlined under 'Non-compliance with policy conditions' on page..."

I'll finish it tomorrow (or maybe the day after).

Before the premiums are due, anyway.

David Chaplin

A personal finance columnist for the NZ Herald

David is a freelance journalist who has covered the financial services business on both sides of the Tasman for over 15 years. David has edited magazines and websites for the financial advice, investment and superannuation industries. Today, he contributes to various publications in Australia as well as his bi-weekly blog for the NZ Herald under the 'Inside Money' banner.

Read more by David Chaplin

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