Clarity in drafting insurance contracts

Understanding insurance contracts doesn’t have to be a daunting task for clients. With the right methods and a dose of goodwill, it's possible to simplify their wording and learn how to better explain them.

In Quebec, the Civil Code and the Consumer Protection Act (CPA) contain provisions related to the clarity of consumer or adhesion contracts. For example, Article 1436 of the Civil Code states that a clause “unreadable or incomprehensible to a reasonable person” may be annulled if it causes harm to one of the parties.

This clause also emphasizes the advisor’s responsibility. Indeed, a court may refuse to annul a clause if it is proven that “adequate explanations about the nature and scope of the clause were given to the consumer or adherent.” Therefore, an advisor who notices that certain parts of an insurance contract may be difficult to understand has every interest in explaining them clearly and documenting this effort for the benefit of the client.

The Civil Code also provides that an ambiguous clause must be interpreted in favor of the consumer. As for the CPA, Article 25 specifies that the contract must be “clearly and legibly written.”

Despite this, insurance contracts (and they’re not the only ones!) remain notoriously difficult to read and decipher for the average person. “The laws speak of clarity but do not define what is meant by plain language or offer guidelines on how to draft a contract so that it is considered clear,” says Ms. Sara Eve Levac, lawyer and analyst at Option consommateurs.

In 2023, the International Organization for Standardization (ISO) published ISO 24495-1:2023 on plain and simple language. It presents principles and guidelines for drafting more digestible contracts. “But it doesn’t apply under Quebec law,” Ms. Levac notes. “These are guidelines that companies can use to draft contracts.”

Tips for simplifying writing

Why are companies like insurers slow to change their drafting methods? First, out of habit. Lawyers tend to draft contracts the way they were taught. This traditional form has become standard and seems reassuring. “We learn to be rigorous and to protect the organization against all possible and imaginable risks, but not really to put ourselves in the shoes of clients who are not lawyers,” explains Ms. Stéphanie Roy, lawyer and co-founder of En Clair, a firm that helps simplify legal documents.

She refers to the ISO definition, which states that a clearly written contract should allow the client to quickly find information, understand it, and use it. This involves not only the words used but also the structure and presentation of the document.

4 key factors for plain language drafting

Ms. Roy identifies four particularly important factors in drafting a contract in plain language:

Overall appearance of the contract

The client’s first impression is fundamental. “It determines whether they feel competent to read the document,” explains the lawyer. “If the text is very long, filled with complex words and incomprehensible headings, it’s very off-putting.”

Document navigability

Can the text be easily skimmed to identify key messages and understand the main points? Are the most important pieces of information easy to find and clearly visible? Are the section titles easy to identify and written in plain language? Often, simply replacing a legal term with a synonym can help. In insurance, a word as seemingly simple as premium can cause confusion, as many people mistake it for benefit. It can also be confused with contribution.

Choice of information in the contract

The length of a contract discourages clients. Companies could benefit from trimming clauses that cover highly improbable risks or are no longer necessary.

Clarity and visibility of words and sentences

Reviewing the wording is essential. Ms Roy gives a simple example: “We reimburse the costs incurred for nursing services, up to $10,000 per year, subject to prior approval.” It would be much more effective to start by stating that prior approval is required. It should also be explicitly stated that if this approval is not obtained, the insurer may refuse reimbursement. These nuances often escape clients. “Contracts often contain clauses with implicit legal inferences that clients cannot understand because they are not trained in the field,” she laments.

Learning to explain clearly

That said, it’s difficult to simplify a contract to the extreme where it can be fully understood without explanation by all clients, who have varying levels of literacy, numeracy, and financial literacy. The advisor’s role as an explainer remains crucial, and their duty to ensure client understanding is fundamental. “Simplifying language isn’t something you improvise,” says Stéphanie Roy. “You have to prepare.”

She offers a few tips to achieve this. For Me Stéphanie Roy, drafting contracts in plain language and the ability to explain them clearly are essential to maintaining the credibility of the financial system and reducing the risk of complaints and disputes. Me Sara Eve Levac believes it improves the consumer experience and strengthens their trust in the company—and especially in the person advising them.