When we hear the expression “in other words,” we know the speaker suddenly has realized he or she is not making headway. Now, he/she is finally going to get to the bottom line and clear it all up.
Insurance product makers should do that in their consumer materials. They should clear up some of those awkward product words that keep fouling up the verbal air of their contracts, brochures and related items.
Take “participation rate,” for example. Index annuities use that term to indicate the rate by which the policy’s credited interest will be computed. It’s really a mouthful. It’s clumsy to say, hard to visualize and difficult for a lot of people (industry and consumer side) to understand.
No doubt the term was borrowed from the mutual fund industry, where brokers tell investors they are “participating” in the market when they own mutual fund shares. But, in index-annuityville, participation rate means something quite different–and consumers who already own mutual funds might get the two mixed up.
Sure, most product materials define the term, and most astute advisors go over its meaning with the client. But why not just call it something simple, like the “link rate” or “index link rate”? Those terms are closer to the actual meaning–i.e., a rate linked to changes in the policy’s stated index. Those terms are also a lot easier to say, and they don’t suggest the policy owner is participating in a market.
How about that other term that’s a mouthful, “annuitize”? Many an industry professional has said they wish that word would just go away. To their credit, some industry thinkers are trying a workaround term–”pensionize.” That’s better, but why “ize” this at all? Why not just say “enters payout stage” or “starts income stage” or some other short phrase for this particular annuity shift?
Maybe the “annuity” word should go away, too. I can’t tell you the number of times people have asked me, “What is an annuity?” They get “pension,” “IRA” and “401(k).” But they don’t get “annuity.” So, either polish that apple or chuck it.
The long term care insurance industry seems to have a grip on some of this. For instance, LTC policies call their home care benefit–what else?–”home care benefit.” So, too, with the nursing home benefit, bed reservation benefit, and so on. Gee, what a concept. Clarity.
Ah, but even in LTC-land, there’s gum on the shoe. For instance, many LTC policies refer to their deductible, which is measured by time, as the “elimination period.” Wouldn’t “waiting period” be easier to say, more positive in connotation and more precise in meaning?
Even in traditional life insurance, words smother meaning. Term life insurance makes sense, of course, because it’s written for a set term. But “ordinary” life insurance just throws people who are not insiders. Even “whole life” causes perplexed looks–I am often asked, “What’s ‘whole’ about whole life?” As for the “modified endowment contract,” or “MEC,” and the “guideline single premium,” people gag at hearing the terms. Why even mention them in consumer materials?
One could have a party, just picking out insurance terms and renaming them for public venues. (Maybe have more than one party, as the list is pretty long.)
This language problem is a key sticking point in all the complaints about the complexity of today’s insurance products. Granted, some policies definitely are very complex, due to their moving parts and multiple options. But others are not as complex as they are difficult to grasp–because the language is so confounding.
This is not to suggest that the industry start reinventing its wheel of jargon. All industries have terms and concepts that serve useful internal purposes, and the insurance sector is no exception. Furthermore, many insurance terms and concepts are woven into laws, regulations and court cases to which the industry must adhere.
But in the marketplace, product makers need to use terms the customer can grasp. This is no simple task, since using simpler words might introduce conflicts with governmental or legal requirements.
Maybe the place to start is to use clear terms right when new product designs are being drafted. This will help ensure that those terms will find their way into the regulations, laws and decisions that inevitably follow new product innovation.
Absent that, the industry’s wordsmiths need to keep pressing for the “clearest language possible.” The “simple English” initiatives of recent history are steps in the right direction. But clarity needs to go deeper still–right to the marrow of product terms. In other words, find better words.