The Requirement of Simple and Clear Wording in Insurance Contracts

On 26 June 2023 at the most recent workshop organised by IVASS, the Authority presented the results of the  survey on the simplification and clarity of insurance contracts.

The clarity and simplification of policy wording is not a new issue for IVASS. In fact, Ivass:

  • has already addressed this aspect in 2018, publishing the “Simple and Clear Contracts” Guidelines containing indications on how to draft insurance contracts in a more readable and understandable manner;
  • with Regulation No. 41/2018, has reaffirmed the principle of contractual clarity and consistency between the information provided in the pre-contractual phase and the content of the contracts signed.

IVASS reported that it had examined a sample of 30 accident contracts written by 30 different insurance companies (which represent approximately 80 per cent of the premiums collected in the sector). These contracts were subjected to what is known as a “qualitative-quantitative analysis of the clarity of insurance contracts”, based on the Gulpease index, which indicates the degree of readability of a text on a scale from 0 to 100 (100 being the most readable and 0 the least readable).

The survey showed that the contracts examined had a readability level ranging from a minimum score of 39.539 to a maximum score of 48.420, with an average score of 44.329.

On the basis of the above results, and in order to improve the clarity of insurance contracts, IVASS has published indications aimed at ensuring a better intelligibility of the contracts (in this sense, IVASS has invited the companies to use graphics that allow a clear readability, to use vocabulary that is easy to understand and clear, and to make practical examples).