Insurance consumers are turning to AI consultants even for basic information already contained in their policy documents. Critics say the sheer volume of medical and legal jargon packed into policies running dozens of pages makes it nearly impossible for ordinary consumers to find what they need. [Created using Gemini]
Insurance consumers are turning to AI consultants even for basic information already contained in their policy documents. Critics say the sheer volume of medical and legal jargon packed into policies running dozens of pages makes it nearly impossible for ordinary consumers to find what they need. [Created using Gemini]

One in three consumers who seek insurance advice does not know what their own policy covers, a new analysis shows. The answers are almost always in the policy documents — but with standard insurance policies running more than 60 pages, those documents have become, in effect, unreadable, pushing even the most basic questions toward customer service channels.

According to Habit Factory, the operator of insurtech platform Signal Planner, an analysis of 5,000 randomly sampled queries submitted to the company's AI assistant in the second quarter of this year found that questions about coverage scope and whether a claim could be filed accounted for 36.59 percent of the total — the single largest category. Auto insurance questions came second at 25.07 percent, and queries about insurance terminology and basic concepts reached 12.63 percent. Together, the three categories account for nearly 75 percent of all queries. New policy subscription consultations (9.86 percent), coverage comparisons across products (6.11 percent) and claim filing procedures (4.79 percent) followed in that order.

The questions themselves are straightforward. Consumers asked whether manual therapy is covered under their loss-of-income insurance, whether a third-party driver is covered under their auto policy, and whether a 90-year or 100-year policy term is the better choice. Questions about basic insurance concepts — such as the difference between covered and non-covered treatments under loss-of-income insurance, or the distinction between illness and injury — consistently appear as well.

The problem is not that the answers are missing — it is that consumers cannot find them. Coverage scope and payment conditions are already spelled out in policy documents. But those documents stretch beyond 60 pages, are dense with medical and legal terminology, and are organized in ways that make it hard to locate a single relevant line. Both the industry and regulators acknowledge that redundant and unnecessary content adds to the clutter. Practical information such as how to file a claim is scattered across separate documents — product brochures, subscription forms and others — rather than the policy itself, leaving consumers unsure where to look before they even begin.

The cost of unreadable policies falls on consumers. People miss payouts they are entitled to because they did not know to claim them, or they assume they are covered only to be rejected and end up in a dispute. Of the 53,450 insurance complaints filed with the Financial Supervisory Service last year, 57.4 percent, or 30,674 cases, involved insurance payment disputes — more than half the total.

The complexity has structural roots. Since insurance product deregulation in 2015, 99 percent of products on the market have been designed and sold at insurers' own discretion. As product structures grew more complicated, so did the policy language, and that complexity has become a persistent source of disputes. Financial regulators introduced product-feature icons in 2017 and a visual policy summary in 2020, but because those overhauls were led primarily by insurance specialists, the core problems — difficult terminology and information overload — were never resolved.

In response, the Financial Supervisory Service formed a task force on insurance policy and product disclosure improvement in April and has been holding working-level meetings since. The task force includes an advisory panel of consumer and civic groups alongside experts from the medical, legal and research communities, as well as working-level staff from the FSS, the Insurance Development Institute and the Korea Insurance Association. Meetings are scheduled to continue through July 21.

The reform agenda is focused on the friction consumers actually experience. Product disclosures would be restructured into two sections — product guidance and regulatory guidance — so consumers can focus on what a product actually covers. Consolidating overlapping materials currently spread across multiple documents is also on the table, targeting the problem of consumers not knowing where to look. Complex content would be visualized through infographics and AI chatbots, and frequently disputed policy terms would be rewritten in plain language.

Meetings are held weekly or biweekly depending on the issue. The emphasis, however, is on thoroughness over speed. "We have not yet settled on specific improvement measures and are still working through the discussions," an FSS official said.

The real test is whether the changes will make a practical difference. Given that two previous overhauls left consumers largely unimpressed, observers say this round must go beyond rearranging sections and create a structure in which consumers can find answers on their own. "If the policy overhaul ends up simply reordering sections, nothing will change from the consumer's perspective," an insurance industry official said. "The reform will only be meaningful if it reaches the point where consumers can look up what they want to know and actually find the answer themselves."


psj@heraldcorp.com