As COVID-19 began forcing shutdowns across the nation, small-business owners looked to their insurance policies. Were they covered? Not surprisingly, the policy language caused more than a little confusion.
The debate over whether business policies provide business interruption coverage for lost revenue from these types of closures has led to significant litigation and multiple class action lawsuits.
The issues ultimately will be settled by the courts.
But you shouldn’t need an attorney to understand the fundamentals of your insurance policy.
This situation reminds me of a line from the movie Cool Hand Luke: “What we’ve got here is a failure to communicate.” Today’s insurance policies are minefields of legalese and jargon. Take these examples:
“If the Declarations do not show a Limit of Insurance providing a specific Coverage or Coverage Extension, then such Coverage or Coverage Extension is not provided by this Policy even though the language for such Coverage or Coverage Extension may appear within the Policy.” Really?
“You may qualify for a contingent non-forfeiture benefit.” Why not just say you can still receive benefits even if you stop paying for this policy?
A cynic might wonder if confusing the consumer may be the goal. At a minimum, they might think consumer satisfaction isn’t a high priority.
No one – not a business owner, a homeowner, a renter, a driver – should be confused by the basic language explaining what their insurance covers. Policies should be in user-friendly language. For complex subject matter and legal issues, an insurer could include summaries in plain language – in readable type, right up front.
Since becoming Texas insurance commissioner almost three years ago, I’ve been advocating for the use of plain language. It’s an issue I noticed in my prior experience as an attorney and judge. I was part of an effort to rewrite jury instructions to ensure that jurors could genuinely understand the legal principles needed to reach an appropriate verdict. The project was driven by objective testing to confirm what language confused jurors and what language was understandable to the average juror.
A similar approach is long overdue in insurance.
Here’s a recent example of the value of plain language: Last year, the Texas Legislature passed strong protections against surprise medical bills. The law included an exception if a patient signed a disclosure. Consumer advocates worried the exception could be abused if patients were asked to sign forms they didn’t understand.
The form we developed starts with a clear title: “Do you agree to pay more for out-of-network care and give up important legal protections?” It explains the rights the consumer would waive by signing the form and includes an estimate of how much the consumer might be billed as a result – all in plain, user-friendly language.
Have you ever heard of a form getting praise? This one did. “I don’t see a scenario where a consumer gets this form and doesn’t know what they’re getting into,” one consumer advocate testified during a hearing. Exactly. A clearly worded form reduces confusion and the odds of long and expensive court battles.
And we’ve only made a start in Texas. We’re also exploring ways to improve some of the most common insurance documents, including the explanation of benefits from a health plan and the summary page with a homeowner policy. We’re also working to provide new tools to help consumers easily compare policies when shopping for insurance.
These are the types of fundamental changes that could help transform the consumer experience, but consumers will benefit most with a national commitment to plain language. There is far too little support for it in the industry today, and that’s baffling. Plain language benefits everyone. Consumers will understand what they’re buying – and what they’re not buying. Insurance companies will see fewer complaints and lawsuits. It’s win-win.
The coronavirus outbreak has spotlighted potential confusion and costly legal fallout caused by bewildering insurance policy language. We need a coordinated effort to strengthen and enforce plain language requirements in state laws. And the industry should recognize and embrace the important long-term benefits of consumer-friendly policies.
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