Lloyd’s wants the industry to make insurance products less complex and provide customers with greater certainty.

In a report published last week the market says COVID-19 has highlighted the urgent need for insurers to develop “simpler insurance products” in response to the challenges thrown up by the pandemic.

Product complexity, a long-running problem made worse in part by lengthy policy wordings, is currently in the spotlight because of disputes over whether pandemics are covered by business interruption policies.

“The more complex a product is, the less likely it is to provide peace of mind to customers,” Lloyd’s says in the report. “Worse, it may be the case that if customers do not fully understand the terms of their product, they either breach those terms or believe they have cover when they do not.

“COVID-19 provides an inflection point for the insurance industry to take stock and reconsider how it can better serve its customers, and in doing so reinforce its critical societal role.”

Prepared in collaboration with Lloyd’s Global and UK Advisories, the report outlines ways in which insurers can reduce complexity and provide customers with greater certainty over their cover.

Lloyd’s says the challenges must be addressed as a survey it conducted earlier this year found attitudes to insurance have deteriorated because of COVID-19, with “the perception that some policies have not performed as expected”.

The organisation will begin work next year on providing “clearer and simpler” product documents to improve clients’ understanding of policies. This will be complemented with the introduction of a standardised Lloyd’s upfront contract summary document that will initially be available for retail and SME policyholders.

The work is part of Lloyd’s own affirmative action to address the “distinct complications” that have arisen from pandemic insurance coverage uncertainty and resulting court disputes between insurers and clients.

Click here to access the report.