This article explores how the principle of transparency operates within the insurance sector, understood as a specific application of the broader duty of fairness and good faith.
In regulated markets such as insurance, consumers, in theory, receive all necessary information. However, due to the complexity of the language used in contractual provisions, they often struggle to fully understand what they are purchasing.
- Introduction
The insurance market is significantly not balanced in the bargaining power between professionals and policyholders. This is primarily due to the technical expertise of insurance professionals and the difficulty customers face in accessing—and more importantly, understanding—key contractual information.
Under both primary and secondary legislation, transparency refers to the need to ensure that consumers receive accurate and comprehensive information that allows them to clearly understand the features, risks, and costs of the products offered. The latter help consumers in the decision-making process and facilitates the product comparison.[1]
The clarity and comprehensibility of insurance contracts have thus become central to the promotion of market competitiveness. Without them, meaningful product comparison would not be possible.[2]
An informed consumer, who clearly understands product features, will be able to compare offerings and rationally select the one that best meets their needs. Moreover, by providing clear and comprehensible information, the disputes regarding the interpretation of individual contract clauses reduce, ultimately lowering legal and administrative costs.
To improve consumer protection and promote contract clarity and simplification, the Italian Institute for the Supervision of Insurance (i.e., Istituto per la Vigilanza sulle Assicurazioni, “IVASS”) has repeatedly encouraged the market to revise policy clauses—particularly those relating to coverage and exclusions.
The importance of this issue is reflected in IVASS Order no. 147 of June 20, 2024, published in the Official Journal (General Series No. 155, July 4, 2024), which amended IVASS Regulations 40 and 41 of 2018. The aim was to simplify pre-contractual disclosures regarding distributors, products, required attachments, and sustainability-related information.[3]
With these simplifications, IVASS sought to enhance the effectiveness of the information provided to clients, thereby strengthening consumer protection. Through concise and streamlined templates, the authority intends to eliminate redundant information, while still ensuring that essential content on guarantees, exclusions, costs, and product limitations is clearly communicated.
In the explanatory report attached to the Order No. 147/2024, IVASS stated that, in line with Article 166 of the Italian Private Insurance Code (i.e., Codice delle Assicurazioni Private, “CAP”), contracts and related documents provided to policyholders must be drafted in a clear and comprehensive manner. Pre-contractual disclosures regarding both the product and the distributor must be written in a simple, concise language, ensuring completeness (see Articles 54(2), 56(5) of Regulation No. 40/2018 and Article 33 of Regulation No. 41/2018).
It is therefore essential that the information in pre-contractual documents aligns with what is stated in the general terms and conditions—particularly regarding limitations and/or exclusions of guarantees and costs — so that the consumer truly understands the product they are purchasing.
- Protection of the legitimate expectations of a party who was not involved in the drafting of the contract.
Transparency, understood as clarity and comprehensibility of insurance contracts, aims to minimize the challenges posed by complex legal language, especially in regulated sectors such as insurance, where contracts are unilaterally drafted by insurers and offered to the other party.[4]
To ensure precision, the drafting party often uses legal and industry-specific terms. However, this pursuit of accuracy may hinder clarity. Therefore, insurers must make a significant effort to make contracts “user-friendly” and prevent confusion or misinterpretation.
In this context, transparency functions as a guiding principle for the “stronger party”, who unilaterally drafts the terms of the agreement.
Transparency requires the drafter to write clauses in such a way that the average consumer may understand the substance of the agreement without needing to make an unreasonable interpretive effort—judged by the standard of someone of similar education and experience.
The drafting party shall balance legal accuracy with linguistic clarity. Avoiding ambiguous or overly complex terms not only protects the consumer but also benefits the insurer, as unclear clauses can backfire on the party that wrote them.
Indeed, according to Article 1370 of the Italian Civil Code, “clauses included in general conditions or pre-printed forms prepared by one party shall be interpreted, in case of doubt, in favor of the other party.” This principle is echoed in Article 35 of the Consumer Code, which states that contracts shall be written clearly and understandably and that, “in case of doubt about the meaning of a clause, the interpretation most favorable to the consumer prevails.”
This principle of protecting the legitimate expectations of the non-drafting party is well-established both in legislation and case law. Courts have ruled that ambiguous insurance clauses, particularly regarding coverage exclusions, must first be interpreted using all standard interpretative tools, and, if still unclear, shall be interpreted against the insurer (see: Italian Supreme Court, Civil Division VI, judgment No. 25849 of September 23, 2021 and Court of Vicenza, Section I, judgement No. 286 of February 20, 2025).
In the insurance sector, any clauses limiting the insurance risk, if included in standard terms unilaterally prepared by the insurer, are subject to Article 1370 of the Italina Civil Code, and in case of doubt, shall be interpreted to the disadvantage of the insurer (Italian Supreme Court, Civil Division III, judgement No. 10825 of June 5, 2020 and Order No. 28173 of September 28, 2022).
Clarity and comprehensibility should not be evaluated in regard to a single clause but in relation to the contract in its entirety. Indeed, Article 1363 of the Civil Code provides that: “contract clauses shall be interpreted with reference to one another, attributing to each the meaning that results from the entire agreement.” Consistency may be achieved only through this approach, avoiding interpretative conflicts that could lead to disputes between insurer and insured.
The Supreme Court has reaffirmed that “the common intention of the parties shall be ascertained by analyzing the literal meaning of the words, viewed in light of the entire contractual context” (Italian Supreme Court, Civil Division, judgement No. 24267 of November 3, 2020).
- General Principles on Transparency
The principle of transparency represents a concrete expression of the general obligation of fairness and good faith, applicable from pre-contractual negotiations to contract execution.[5]
In the insurance sector, transparency is provided under several provisions of the CAP, including:
- Article 120-quater CAP, which requires pre-contractual disclosures to be clear and easy to read, using legible font sizes;
- Article 121-sexies CAP, which affirms the need for clarity and comprehensibility of pre-contractual information, particularly for insurance-based investment products;
- Article 166 CAP, which stipulates that all contractual documents shall be clearly written. This reaffirms the duty of clarity beyond Article 1341 of the Italian Civil Code (Italian Supreme Court, Civil Division III, judgement No. 15598 of June 11, 2019);
- Articles 185-bis and 186-ter CAP, which promote brevity, clarity, readability, and comprehensibility of pre-contractual disclosures.
Further guidance is found in IVASS Regulation No. 41 of August 2, 2018, particularly:
- Article 4, which mandates that pre-contractual documents be written clearly and concisely, using a simple structure and readable font;
- Article 33, which requires consistency in terminology between pre-contractual and contractual documents to improve the consumer’s reading experience.
In summary, using clear language, simple style, logical structure, and maintaining coherence between documents helps simplify the relationship between insurer and consumer.
At the April 10, 2025 IVASS workshop, there was a significant response from the market. Insurers have taken major steps to improve the clarity of their contracts, including:
- Reviewing the structure of contracts;
- Reorganizing information to avoid redundancy and ensure consistency;
- Stressing on graphic design with examples and explanatory boxes;
- Aligning pre-contractual and contractual wording to avoid confusion.
Transparency in the insurer-policyholder relationship implies a duty to “speak clearly.” This applies not only to formal documents but also to advertising materials, which shall be clear and never misleading—even when aiming to persuade consumers.
Advertising thus becomes a tool for correctly guiding consumers toward the most suitable product.
- Conclusions
Despite the ongoing efforts of the market and oversight authorities like IVASS and the Italian Association for Insurance Companies (i.e., Associazione Nazionale Imprese Assciuratrici, “ANIA”) to improve the clarity of insurance documents, contract readability—measured by the Gulpease Index[6]—remains low, even if recent results are encouraging.
The challenge lies in balancing completeness of information with clarity of expression. It’s difficult to thoroughly define all coverage and exclusions while using accessible, plain language. To support this effort, ANIA has issued the Guidelines for Clear and Understandable Contracts, which offer insurers practical tools for improving communication with non-specialist customers.
While revising and simplifying contract language may be costly for insurers, it will likely reduce legal disputes and enhance consumer trust.
In conclusion, beyond the continued collaboration between the insurance sector and the supervisory authority, the newly introduced Insurance Ombudsman will play a crucial role in promoting clarity and fairness. Through its decisions on coverage and exclusions, it will provide insurers with valuable insights to further simplify their products and manage legal risks more efficiently.
[1] See speech by Stefano De Polis on 25 November 2021, The need to simplify insurance contracts: towards more transparent contractual models?
[2] See F. Greco, Diritto delle Assicurazioni – Attività, contratti, Responsabilità e Mercati a cura di M. Gorgoni e F. Greco, Pacini, 2024, 402 ss.; Costi, Informazioni e Contratto nel mercato finanziario, in Riv. Trim. Dir. Proc. Civ. 1993, 721 ss.; M. Chiarlo, La tutela del consumatore di servizi assicurativi, in Ass. 1994, I, 23; Minervini, Trasparenza e riequilibrio delle operazioni bancarie, Milano, 1993, XIX.
[3] The provisions contained in Regulations Nos. 40 and 41 of 2018 lay down editorial, content and stylistic criteria for the information documents that must be provided to customers.
[4] In these cases, we refer to ‘adhesion’ contracts.
[5] See Articles 1337 and 1375 of the Italian Civil Code.
[6] The Gulpease index indicates the readability of a text.