Unravelling Complexity in Malaysian Life Insurance Policy Documents: The Questions of Readability and Lexical Density

Studies on knowledge of insurance literacy have shown that people have poor understanding of terms related to disclosures due to the complication of the language of the fine prints. To avoid insurance disputes, certain jurisdictions in the US have incorporated the use of readability formulae, to help assess the reading-level of the policy for the benefits of the policyholders. In Malaysia, it is not known whether such a readability formula is incorporated in the drafting of the insurance policy. Thus, this study aimed to fill the gap by analysing the insurance policy provided by insurance companies in Malaysia in terms of its readability and lexical density. The data were procured from the policy documents obtained from two insurance companies in Malaysia. The policies were analysed using five validated readability formulae of Flesch Reading Ease Index, Flesch-Kincaid Grade Level Index, Gunning Fog Index, Simple Measure of Gobbledygook (SMOG) and Coleman-Liau Index, and Halliday’s lexical density formula. The readability consensus grades the policy documents as ‘difficult to read’. The analysis also reveals ‘average’ and ‘above average’ level of lexical density in both policies. The findings suggest that policyholders with a low level of English language proficiency may find it challenging to understand the legal documentation that elaborate their powers and liabilities to the contract signed. The findings of this study call for the attention of relevant authorities to mandate the incorporation of readability formulae in any policy drafted and the development of readability formula for English as a second or foreign language.