ABI backs consumer education drive as alternative to standardised insurance products

The Association of British Insurers (ABI) has outlined plans for a major public education campaign designed to improve consumer understanding of insurance products, while rejecting proposals to introduce minimum policy standards on price comparison websites.

Speaking during a House of Lords Financial Services Regulation Committee hearing on the consumer insurance market, Chris Bose, ABI Director of General Insurance and International, said the trade body was developing a “multimedia multi-year” campaign to help consumers better understand the purpose of insurance products, what they typically cover and the terminology used within policies.

“The main thing we’re going to be doing is delivering a campaign which is designed to try to get customers to understand the core insurance products,” Bose said.

The initiative comes in response to concerns raised during the hearing that many consumers believe they understand their insurance cover but are often unaware of important limitations, exclusions or policy features. According to Bose, the campaign will seek to provide consumers with “simple heuristics and rules of thumb” to support more informed purchasing decisions.

As part of the wider effort, the ABI is also working with the UK’s Financial Conduct Authority (FCA), consumer groups, and price comparison websites to explore ways of providing clearer information about insurance risks and coverage. Bose added that some insurers were already collaborating with consumer groups to improve policy wording, with artificial intelligence (AI) potentially playing “a fairly big role” in simplifying documentation and communications.

However, Bose rejected calls from Baroness Bowles of Berkhamsted for insurers to adopt a minimum or standardised level of cover on products sold through comparison sites. The proposal was put forward as a way of helping consumers make like-for-like comparisons and better understand differences between policies.

Bose argued that imposing mandatory standards could reduce flexibility in product design and ultimately increase costs for policyholders.

“If you start going down the route of hard standardisation where you mandate that insurance products define certain terms in certain ways, there is a risk that you are creating a much more rigid policy,” he said.

Instead, he maintained that consumers benefit from a market offering a range of products, from basic to comprehensive cover, provided they are equipped with the knowledge needed to assess those options.

“What we need is consumers to understand and then make the right decisions,” Bose said. “I don’t think regulating for standardising policy terms is going to be good from affordability or an accessibility plan.”