Consumers confused by insurance products

According to a new report by insurer trade body ABI - income protection and critical illness are the hardest for the public to understand.

Payment protection insurance, critical illness cover, and mortgage payment protection insurance ranked the lowest in terms of general understanding.

52 % rated their understanding of payment protection insurance at five out of ten or below.

36% rated their understanding of critical illness insurance at five out of ten or below.

52% rated their understanding of private medical insurance as good.

48% rated their understanding of life insurance as good.

The ownership levels of all four types are low.

The 2500 consumers were asked how difficult they find it on average to compare the benefits and features of each type of insurance product.

Payment protection insurance and critical illness cover once again finished towards the bottom, with 55% and 45 % indicating considerable difficulty in judging these products’ merits versus competitors.

Private health and life insurance also suffered in terms of product comparability, with around a third claiming difficulty while shopping for policies.

The results are a sharp warning to insurers that they are losing potential business as consumers find it hard to understand the products.

Simplifying product terminology and adjusting to the economic reality may prove to be necessary steps for insurers if they wish to thrive and attract more clients in 2012 and beyond.

Critical illness came off the worst, and it is a product designed by industry committee. Perhaps it is also a warning to trade bodies, insurers and regulators, that products designed by consensus are no replacement for simple easy to understand products developed by individual insurers.

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