Texas Insurance Commissioner to Industry: Watch Your Language!
Note: This is the second article in a three-part series resulting from a conversation with Texas Insurance Commissioner Kent Sullivan.
Texas’ chief insurance regulator wants the insurance industry to clean up its language. And, no, he’s not talking about the kinds of words that would have made a ’50s-era grandmother blush.
What Texas Insurance Commissioner Kent Sullivan has a problem with is insurance industry jargon that obscures rather than informs and confuses rather than clarifies. In short, Sullivan is a plain language proponent who is urging the industry to “keep it simple.”
That’s because words matter — to consumers, regulators, judges and juries, Sullivan said. “If you wanted to increase the number of consumer complaints you have and increase the amount of litigation you have, you’d deliver your product in a black box, in a largely indecipherable fashion. The end result would be unhappy consumers; I think the industry has had its share of that.”
It’s not just insurers that fall short of the “keep it simple” principle. Regulators and consumer advocates sometimes fall into the industry jargon trap, as well. So, at Sullivan’s direction, the Texas Department of Insurance rolled out its own plain language initiative last year, revising its website to simplify and clarify the information it provides to consumers, recruiting volunteers to review information before it is published, and urging insurers to stick to plain language in their policies and notices to consumers.
“I think there’s no better form of consumer protection than having a consumer who is adequately informed about the product that they’re considering and ultimately buying. … Insurance presents very unique issues in that regard. I’ve often analogized this to the classic black box, where for the most part, consumers deal with a product that is largely opaque in terms of their ability to really navigate it and understand it,” Sullivan told Insurance Journal.
The commissioner said he’s seen some progress with the plain language initiative. “I know that one major insurer this year has rolled out a three-page plain language property/casualty form. It’ll be interesting to see how that is received by the market place.”
He also gave an example of an area where the department is proactive in insisting on the use of plain language: the long-term care niche of the insurance industry.
Long-term care insurers have been asking for rate increases, sometimes substantial ones, Sullivan said. “One of the things that we’ve insisted on is that if a rate increase is granted that, number one, a notice go out to the consumer that meets plain language standards and that very clearly informs a consumer of the rate increase, the nature of it and the amount of it. Then we insist, again in plain language terms, that the consumer be given choices whenever possible.
“Generally speaking, the choices that we look for are alternatives to phase in the rate increase so it doesn’t occur all at once, to avoid the rate increase entirely if the consumer would choose otherwise to scale back benefits consistent with an actuarially sustaining policy, or number three, to allow the consumer to pursue cash out options.”
The department wants to make sure that the consumer clearly understands their options and is well-enough informed to make an intelligent choice, or in the alternative, to know where they can access additional information and get their answers to their questions.
“That’s our idea, I think, of effective consumer protection, and to the extent that we can roll that concept out on a broader basis, that’s the sort of thing we want to do,” Sullivan said.
The unprecedented flooding wrought by Hurricane Harvey in 2017 exposed another important shortcoming in policy language, with respect to consumer understanding of the coverage contained in homeowners policies with regard to flooding.
Homeowners policies typically do not provide flood coverage but many homeowners impacted by Harvey’s waters seemed to be unaware of that fact. Now, there are several proposals before the state Legislature that would require homeowners policies sold in Texas to include a notice up front that no flood coverage is included in the policy.
It’s a proposal the insurance department not only supports but one that was included in TDI’s written recommendations to state lawmakers previous to the beginning of the current session.
“It was one of our legislative recommendations that plain language notices go to consumers with their policies or as a part of their policy to ensure that there was no question that the policy did not include flood coverage and in order to obtain flood coverage you had to buy a separate policy. It is one of the tragic lessons of Hurricane Harvey that, in the Houston area particularly, too many people simply did not have flood coverage. There’s simply no reason for anyone to not understand what their policy coverage is or is not on such a basic issue,” Sullivan said.
He said as a concept, the insurance industry in Texas has been supportive of the idea of including a plain language flood notice in property policies. But, Sullivan said, “I think only time will tell in terms of exactly how that is worked out. I think conceptually almost everyone I spoke with was on board.”
Sullivan said too much “unfriendly communication” continues to be passed to consumers by the insurance industry. “The language is opaque, often speaking in a sort of insider baseball fashion and I think we simply have to move from that. ”
Still, he said: “I’d like to think that we’re making some progress. As I mentioned I think the development of the three-page property/casualty plain language policy is extraordinary. It also involves some other concepts, and that is, as you can imagine if it’s only three pages long there are very few exclusions. In fact it’s a policy, as I understand it, that provides flood coverage. Again, consistent with an entirely new concept. Whether it ultimately becomes a significant disruptor remains to be seen.”
Sullivan added that he likes “the fact that there are new things, new dynamics in the marketplace. I think the conversation is beginning to head in a direction it probably should have headed years ago.”