The consumer group, Fairer Finance, has said that the fine print on many banking and insurance products is only comprehensible to people of post-graduate student level.
The organisation also revealed that around 30% of insurance policy documents used terminology that would only be understood by people of a university level education.
The information was compiled by comparing the legal documents of 280 different products and then evaluating them against a range of reading score formulae.
It is thought that around 16% of adults in the UK are at a reading age of 11 or lower.
The report went on to say that there are no insurance policy conditions that can be read by someone with reading skills equivalent to those of an 11-year-old just starting secondary school.
The managing director of Fairer Finance, James Daley, said:
“By communicating in a language that many people simply can’t understand, banks and insurers are discriminating against large swathes of their customers,”
“As well as being unfair, it is also bad business. If customers do not understand what they are buying, they are more likely to be disappointed. It is in everyone’s interests that companies communicate clearly with their customers.”
An ABI (Association of British Insurers) spokesperson said:
“All insurers want to ensure that customer documents are as clear and transparent as possible.
“They will continually review their customer materials, as they want policyholders to read policies and understand what they are covered for and what they need to be aware of. We would also encourage consumers to read what they receive from their insurers, and speak to them if anything is unclear.”
The Money Advice Service published a report last year suggested four in five UK adults do not read the terms and conditions when purchasing products such as mortgages or taking out personal loans.
The report estimated that not fully understanding the jargon in small print for financial products cost consumers in the UK around £21bn per year. This translates to an average of £428 per adult.
The Financial Conduct Authority (FCA) published a paper in the summer that asked companies in the financial sector to think of new ways in which they could communicate with consumers.
The Fairer Finance group are now calling on the Financial Conduct Authority to start fining companies that do not provide simpler, easier to understand documents. The FCA rules clearly state that all communication with customers must be “clear, fair and not misleading” but Fairer Finance believe that this rule is being breached by every company on the market and is asking the FCA to do more to stop it.
If you have had trouble understanding the jargon in your financial products, you should head to our financial guides section. We will walk you through the basics of what to expect from your provider and we cover everything from loans and debt to insurance and mortgages. We also have a jargon busting glossary that will help you to get a clearer idea of what your small print is actually saying.