Transparency and Readability of Consumer Information

Last Updated: 8/24/2023
Issue: Insurance regulators recognize the difficulties consumers encounter when seeking personal lines insurance coverage and are researching whether consumers receive enough information to compare different insurance companies' personal lines policies.

Overview: Consumer advocates argue that not all homeowners' policies offer the same extent of coverage. They have also contended that the quality of coverage can differ from policy to policy. Additionally, the advocates have maintained that consumers are unable to evaluate an insurance policy because the policy language is not available until the consumer purchases the policy. Advocates maintain that neither brokers nor agents have access to the policies they are selling, suggesting that they are unable to review the disparities in coverage.

Opponents disagree with the public dissemination of policies and argue that many consumers do not read their policies in full. They also claim that homeowners insurance is complicated, since policies are subject to state regulations, which are not the same. Opponents also contend policyholders can request amendments or endorsements to their insurance contract, which adds confusion to comparison shopping.

Status: In 2010, the NAIC formed the Transparency and Readability of Consumer Information (C) Working Group to review the controversies surrounding transparency and readability. The working group has compiled multiple documents, which have been adopted by the Property and Casualty Insurance (C) Committee, and the Executive (EX) Committee and Plenary. They include the following:

• Best Practices for Creating Online Policies
• Best Practices for the Design and Implementation of Web-based Consumer Premium Comparison Guides for Personal Auto and Homeowners Insurance
• A Consumer’s Guide to Auto Insurance (2016)
• Consumer Shopping Tool for Homeowners Insurance
• Consumer Shopping Tool for Auto Insurance
• Flood Insurance Basics
• Post-Disaster Consumer Claims Guide

The consumer shopping tools explain how to purchase homeowners insurance and personal auto insurance. Both shopping guides include questions for consumers to ask their agent before purchasing insurance, a list of possible discounts, as well as a tool that provides coverage summary information.

State insurance departments began to post insurance policies online, which required a combined effort between regulators and industry. The working group completed a best practices document for creating consumer online insurance policy resources. This document includes background information, department of insurance considerations, methods of data collection, identifying the scope of the project, document format considerations, web format considerations, additional information, maintenance, and sample forms.

The working group created a flood insurance basics document to help consumers understand the need for flood insurance and information on how to buy flood insurance, as well as some flood facts that can be used by departments of insurance in their social media campaigns regarding the importance of purchasing flood insurance.

The working group's 2023 charges include: Facilitating consumers’ capacity to understand the content of insurance policies and assess differences in insurers’ policy forms; assisting other groups with drafting language included within consumer-facing documents; discussing disclosures for premium increases related to P/C insurance products; updating and developing web page and mobile content for A Shopping Tool for Homeowners Insurance and A Shopping Tool for Automobile Insurance; and studying and evaluating ways to engage department of insurance (DOI) communication with more diverse populations, such as rural communities.