By Linda Koco
No matter what the insurance product line, the regulatory and legal system seems to keep close watch on certain disclosure areas–fees, charges and costs; features; and financial relationships.
Other areas of disclosure get attention, too, of course, but those are the big three–the three Fs, if you will–that keep surfacing in headlines, governmental probes and client complaints.
The insurance and financial sector, awash with a myriad of complex and multi-disciplined products, finds it must explain, explain, explain, lest the customer make a wrong buy.
This emphasis on disclosure is going somewhere–i.e., there is more financial disclosure than ever. But it’s not clear that the outcome always achieves the intended result, because much of what is being disclosed in the name of the three Fs is baffling.
When it comes to reviewing insurance and financial documents, I’m a pretty eager reader. I read all the sections, the fine print, the add-ons and the go-withs. It’s interesting. But I have to tell you, a lot of what I’m seeing in these documents today is “more” but not necessarily better.
Disclosure history explains some of it.
As you will recall, various governmental and legal actions over the years have attempted to curtail sales interactions that result in consumer accusations of non-disclosure, too little disclosure or wrong disclosure. The “But you didn’t tell me there was a surrender charge” accusations. The “I was never told how that death benefit (or other feature) works” accusations. The “I didn’t know that he was a stock broker (or insurance agent, etc.)” accusations.
The mindful intent has been to protect consumers, by ensuring they are well and accurately informed.
This is a noble goal, well worth pursuing. The large majority of the insurance and financial sector supports it. They want to keep customers, after all, not lose them. They want customers to buy, not sue. They want customers to understand and like what they bought, not say things about it based on bad information.
So, the industry has responded to the calls for disclosure in many ways. Today’s contracts generally have more definitions. They use simple English. Their literature includes graphics, pictures and stories as well as numbers and legalese. Some include forms for consumers to sign, attesting to their understanding of critical points. Advisors are keeping better records. Online applications have drill-downs that ensure key points get covered before submission.