Study confirms it: Insurance policies written in gibberish

Think your insurance policy reads like gibberish? Don't worry -- it's not you, it's them.

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A recent survey conducted by Siegel + Gale, a New York-based branding firm, found that insurance companies ranked near the bottom -- and some were at the very bottom -- of its Brand Simplicity Index in the U.S. and globally.

Stated simply, respondents found insurance companies' products downright complicated. So complex, in fact, that customers didn't understand what they were getting.

Instead of taking comfort in protection from unexpected losses, consumers thought their insurance companies gave them the runaround with all their legal jargon and regulatory mumbo-jumbo. One person who was interviewed for the survey said, "They present plans that are not straightforward. . . . Banks and insurance companies are nothing but a scam to take customers money for their gain." Ouch!

"That showed the link between complexity and trust," says Brian Rafferty, Siegel + Gale's global director of customer insights. "Complexity leads to a lack of trust: Trust in the industry and trust in the brands."

Searching for a Simpler life? Don’t Look to Insurance

Siegel + Gale interviewed more than 6,000 consumers in seven countries for its study, released in February, and also broke out results for U.S. respondents and companies. Not surprisingly, most respondents believe a simpler life will give them "peace of mind and less stress" and help them have a "more enjoyable life." In the U.S., almost 80% indicated that simplicity will reduce stress and about 65% think it will allow them to enjoy life more.

The branding firm then asked the respondents which brands made their lives simpler (less stressful) or more complex (more stressful). Netflix won the simplicity battle. The DVD rental company offers no-hassle plans that let customers choose to order discs through the mail, the Internet or both. The second best company was Subway, and the third best was McDonald's. When you get down to it, what could be simpler than watching a flick and downing a Mickey D’s?

Insurance companies struggled to make a showing. The top-rated insurer in the U.S. survey was Geico, coming in 58th out of 102 brands. Best known for its silver-tongued gecko and hairy cavemen, Geico has honed its simple message over the years: If you have 15 minutes, you can save 15% or more on car insurance.

The next highest ranked insurance company, Progressive Corp., coming in at 70th, also has a simple concept with chirpy saleschick Flo and its easy-to-use insurance superstore.

Other insurers didn't fare as well. Farmers Insurance Group came in at 83, Allstate Insurance Co. at 85, State Farm at 87, Humana at 90, UnitedHealth at 98 and CIGNA at the bottom at 102. Rafferty acknowledges insurance companies' low scores are partly due to the complex nature of their products.

Buying an insurance policy is inherently more complicated than ordering a burger with fries.

Paying for a Better Experience

While these results aren't good news for insurance companies, there appears to be a new business opportunity lurking in the darkness. As fickle as consumers can be, it turns out that they are willing to shell out money in their quest for simplicity. Siegel + Gale's study found that a portion of the respondents would spend at least 3.5%  more for less complicated insurance products and better customer service.

Rafferty says insurance companies could charge more for providing a better customer experience.

Today’s wars in insurance prices make insurance products look like commodities -- no different than coffee, cocoa and pork bellies that can be bought at the lowest price.

"Many players in the industry are not able to differentiate themselves," says Rafferty.

Say What?

Not only do insurers not differentiate themselves, but they also don't even do a good job at differentiating their products. When J.D. Power and Associates conducted a survey that asked homeowners to find their policies in a multiple-choice list, most were clueless. Fifty percent said either they didn't know the type of coverage they had or they chose “guaranteed coverage,” which hasn’t been widely available for years. Standard home insurance policies cover the home's replacement cost up to a certain amount.

"This is a big alarm bell that consumers either have the wrong impression or a misperception of what insurance will provide," says Jeremy Bowler, senior director of the insurance practice with J.D. Power, which rates products and companies based on quality and customer satisfaction. "The communication gap starts the day [insurance companies] sell the policy," he observes.

Insurers aren't the only ones at fault. Most consumers are willing to set aside only a few minutes to answer questions so the companies can assess their risk and give them quotes.

"When consumers shop for insurance, they're not investing as much time or doing as much research as they do when they buy a big-screen TV or book their summer vacation," Bowler says.

To get real value, consumers must take the time to research insurance policies, and insurers have to make that search easier. Right now, the simple truth is that most people don't understand their insurance policies. And that, Bowler says, "is terrifying."