The insurance market is in a process of intense transformation throughout the world, a unique moment of flexibilization and deregulation, focused on empowering consumers and reducing barriers to businesses.
Insurance is based upon risk management, by means of the risk cession through different layers. It plays an important role in society’s protection, in a true supply chain that simultaneously affects various stakeholders: insureds (whether natural people or legal entities), insurance brokers, insurers, reinsurers, and retrocessionaires.
Due to its relevance, the government usually fosters the flourishment of the insurance industry, although it is intensely supervised. The most modern conception about insurance acknowledges that, although it is under the umbrella of financial services, it encompasses a function that surpasses the mere economic compensation of damages suffered due to losses.
In Brazil, the model of development of the insurance market is historically characterized by a high level of state intervention and control, such as the drafting of mandatory contractual clauses, restricting not only the contractual and individual freedoms, but also the ability of modernization and the innovative forces which could drive the market.
However, the federal government and the local insurance authority (Superintendência de Seguros Privados—SUSEP) have recently demonstrated their clear intention to deregulate the market through the enactment of various rules. On the federal level, the Economic Freedom Law (Law No. 13.874/2019) was enacted in 2019, limiting the interference of the government in economic activities, and leading to a normative simplification.
Additionally, significant changes were made in the rules applicable to several insurance lines, such as large risks, massified insurance, and civil liability. Many hope that this movement can extinguish the contracts of 100-plus pages, and with general, special, and particular conditions (where you need to read the whole contract to find out if an asset or situation is or is not covered).
Meanwhile, the legal market has not achieved its highest level, and legal professionals (including attorneys) still struggle to provide creative and high-quality services to the stakeholders involved in the insurance ecosystem. In addition, insurance-related documents contain a high amount of legal or highly regulated content, filled with jargon and expressions with which most people are unfamiliar.
Elizabeth Warren, the U.S. senator and former law professor at Harvard University, once said: “I teach contract law at Harvard Law School, and I can’t understand my credit card contract. I just cannot. It’s not designed to be read”. Unfortunately, this same remark perfectly applies to insurance contracts.
In this context, law is still mostly communicated in a poor fashion, impeding people from exercising their rights in an effective way. At the same time that we are seeing flexibility in insurance, the legal market still needs to learn to be more client-focused.
One of the ways of doing so is the application of legal design. Legal design is a methodology that combines innovation and legal knowledge with a focus on the user experience, so that the law is made clearer and more accessible. Legal design emphasizes the application of legal knowledge before situations become disputes, using the law to generate value, strengthen relationships and allocate risks properly. Thus, legal documents and legal services need to be intentionally designed, applying the proper techniques and tools for desired outcomes and to better serve clients and the community.
Combining design (thinking) and law allows us to, as an example, draft legal documents that are ready-to-use, user-friendly and pro-business, without leading to never-ending lawsuits or administrative proceedings. Moreover, the visualization of legal information helps to avoid unnecessary litigation, improve conflict management, and minimize costs and losses.
Legal design supports collaboration, creating opportunities and preventing problems before they arise, by the application of human-centered design to law. It is about finding the best way to do things in law, empowering both legal professionals and laypeople. In order to be fully understood by its users, law needs to be clearly communicated—in contrast to the traditionally incomprehensible, confusing, and boring format.
Thus, legal design helps to: (i) communicate information in a more meaningful way; (ii) improve the offer and relationship with clients; (iii) transform ideas in new products and services; and (iv) create a culture of innovation.
Regarding insurance, the visual communication of legal aspects can encompass: (i) litigation, demonstrating facts clearly and building a solid argument; (ii) transactions, for the drafting of contracts and agreements that are clear, concise, and easily executed; (iii) regulation, allowing the government to draft rules and norms to which people and companies can efficiently adhere; and (iv) various documents and services, such as insurance policies – whose extension can be limited to the strictly necessary, focused on a better understanding of the policy’s terms and conditions.
UX writing can guide the user experience of people, helping them to achieve their goals (purchasing an insurance policy adequate for their needs, as an example), establishing a positive association for the company or the author of the document, allocating risks and responsibilities, and optimizing the context of a text. Plain language can empower and protect consumers, who frequently face poverty, illiteracy, and lack of ability to understand the language used in insurance contracts and policies.
Many benefits can be attained, helping to create a virtuous cycle in which legal professionals are positioned as business partners and deal makers. In one project developed in Brazil, the following results were obtained: (i) economy of 2 million Brazilian reais; (ii) a 50% reduction in conflicts with customers in the insurer’s call center; and (iii) a 30% increase in the policy renewal rate.
Another case is the creation of a life insurance policy by a Brazilian bank, with an average price of nine Brazilian reais. The bank managed to strip the insurance jargon from the content that appears on the relevant mobile app, with direct and easy-to-understand language, using phrases such as “the insurance died of old age”, “total coverage amount” rather than insured amount, “monthly payment” instead of insurance premium, and “trigger the insurance” replacing notifying of a loss. Those measures lead to a significant result: 50% of their customers are people who had never purchased life insurance before, and in only a few months, it reached more than 101,000 active insurance policies, with a coverage above 10.5 billion Brazilian reais.
Those examples help to demonstrate the return on investment (ROI) of the adoption of legal design to financial services. The evidence points out that a more holistic approach leads to a more satisfying result inside and outside of insurance companies. Happier customers do not feel compelled to look for other providers, and companies also benefit from a seamless operation.
More than the simple use of colors and visual elements, iconography or simpler language, legal design is a powerful vector of positive change, through the creation of better solutions for each situation. Legal professionals need to be willing to collaborate above and beyond the frontiers of the law and be open to rethinking financial services. The future marches in!
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About the Author
Anthony Charles de Novaes da Silva is a Brazilian insurance, reinsurance, and private pensions attorney, and author of the first academic investigation about legal design and insurance. Contact him at firstname.lastname@example.org