DIPS: Clearer Information for the User
The entry into force of the new Law on the Distribution of Private Insurance and Reinsurance will entail the delivery of the DIPS , a document prior to contracting a policy with information as comprehensible as possible for the policyholder.
As we inform in the post “The insurance language is renewed” , the Regulation of Execution 2017/1469 requires that the information document about non-life insurance products (DIPS), that the entities that operate in the European Union must deliver to users before contracting a policy, it must be written using a simple language that moves away from the specialized jargon.
A requirement that, in the absence of its final approval, will be one of the novelties of the new Law on the Distribution of Private Insurance and Reinsurance, at the time of drafting these lines in the draft bill phase and the result of the transposition of the European directive 2016/97 – better known as the Insurance Distribution Directive (IDD) -.
DIPS: what does the bill say?
The Private Insurance and Reinsurance Distribution Act project dedicates an article to DIPS. Specifically, Article 50 ( General duty of prior information on the insurance contract other than life insurance: document of prior information ), which specifies that the latter must be provided “on paper or other durable support”. And, in addition, that must meet the following requirements:
- It will be a short and independent document.
- It will have a clear presentation and structure that allows easy reading and will use characters of a readable size.
- In case the original has been made in color, it should not lose clarity if it is printed or photocopy in black and white.
- It shall be written in the official languages, or in one of them, used in the part of the Member State in which the insurance product is distributed or in another language if agreed upon by the customer and the distributor.
- It will be precise and not misleading.
- It will include the title “information document about the insurance product” at the top of the first page.
- It will include a statement that complete pre-contractual and contractual information regarding the product is provided in other documents.
Regarding the information that the document will have to include, the bill refers to the following:
- Information about the type of insurance.
- A summary of the insurance coverage, including the main insured risks, the sum insured and, where applicable, the geographical scope of application, as well as a summary of the risks excluded.
- The payment conditions of the premiums and the duration of the payments.
- The main exclusions on which it is not possible to submit claims for compensation.
- The obligations at the beginning of the contract.
- The obligations during the term of the contract.
- Obligations in case of request for compensation.
- The duration of the contract, including the start and expiration dates.
- The modalities of termination of the contract.
Unespa: “Simplification provides greater customer protection”
In relation to how the insurance sector has reacted to the requirements of the DIPS, the document has led the Spanish Union of Insurance and Reinsurance Entities (Unespa) to prepare the “Guide to good practices in the use of terminology used in the information document of non-life insurance products . ” A consultation tool that aims to make the words included in non-life insurance -policy, home, health, death, etc.- more clear and understandable.
And bearing in mind that legal terms and professional jargon have been traditionally used in the preparation of insurance contracts, which are difficult for many consumers to understand, Pilar González de Frutos, President of Unespa, welcomes a more secure insurance language. simple:
“Simplification provides greater protection to the customer than the more rigid terms, which can be worse understood by users. I am convinced that a transparent sale in which the policyholder understands what is being purchased will produce better results. ”
DIPS: what is your opinion of the insurance sector?
Regarding the reactions that the DIPS has provoked among the professionals of the insurance sector, Maciste Argente, President of the Federation of Professional Organizations of Brokers and Insurance Brokers of Spain (FECOR) , tells the Xenasegur blog that its requirements They seem very successful:
“They have a clear guarantee orientation for the insurance consumer. Everything that supposes to contribute clarity to the insured ones is always well received, since it is something indispensable and previous to any hiring “.
In the same line, Monica Pons, President of Aunna Association , applauds that the legislator proposes formulas to protect the consumer:
“Promoting and defending transparency and clarity of language is always a good thing. And from Aunna Association we welcome the initiative, although we warn that it will be difficult to reach a balance so that brevity and simplicity do not undermine the quality and relevance of the information that should appear in the document “.
And in tune with his colleagues, Moisés Núñez de Bien, President of the Association of Insurance Mediators of Málaga , adds:
“It is true that the insurance sector has a lot of own and transversal regulations, but I believe that this prior information is good for the consumer. Everything that guides the user to a better understanding of complex products is good “.
In general, should the insurance language be more understandable?
And beyond the requirements contemplated in the DIPS, should the insurance language have to be clearer and more understandable for those who are not familiar with the terminology used in the sector? In the case of FECOR, Maciste Argente highlights the effort made to bring the technical language closer to the colloquial, although it is a defender of the first one:
“Of course we bet on that clarity in the language. But, without doubt, everything has limits and within the framework of an insurance contract it is not always possible to stop using specific terms. Therefore, we advocate using the necessary technical terms, insofar as they are essential, and guide the content of the policies to a language and wording as understandable as possible for the policyholder. ”
With a similar reasoning, Moisés Núñez de Bien also defends the terminology commonly used in the insurance sector:
“Because people do not know about medicine, we can not demand that doctors change their way of expressing themselves. In my opinion, professionals can and should continue with our language. And we must not renounce it, since it represents our cultural and professional heritage. Another issue is that we have the obligation to inform consumers well about any insufficiency that we understand contains a branch or product “.
Finally, Monica Pons, in a speech that stands out from the arguments of the heads of FECOR and the Insurance Mediators Association of Malaga, believes that the technical nature of the insurance language contributes to the perception of opacity that, in general, The society has the sector:
“Facilitating the understanding of the technical terms will allow us to bring insurance closer to the consumer and will contribute to raising their current confidence level. And the brokers play a fundamental role to make consumer insurance accessible and understandable. As advisors, we avoid that the client faces only a complex technical-legal text such as the insurance policy, offering all the necessary information and clearing any doubt regarding the insurance that may arise. We constitute the best guarantee and support so that the client perfectly understands what they sign. ”
In short, while it is true that some professionals are firm supporters of the terminology used in the insurance sector, it is no less true that everyone agrees that language should be used as clearly as possible when it comes to informing consumers. And because of the above, DIPS can contribute significantly to making the products that are commercialized more understandable to users, from the most traditional to digital natives such as “millennials” or those belonging to generation Z.
Insurance Distribution Law: main opinions in the sector