(In)effective Disclosure: An experimental study of consumers purchasing home contents insurance

This world first study, conducted by Monash Professors Justin Malbon (Faculty of Law) and Harmen Oppewal (Monash Business School) examined the effectiveness of home contents product disclosure statements (PDSs) and key fact sheets (KFSs) in assisting consumers to select the best policy that suits their needs.

406 participants across Australia were provided a PDS and/or a KFS and were invited to purchase a home contents insurance policy from a choice of a ‘good’, ‘okay’ and/or ‘bad’ insurance policy.

The study found that:

• up to 42% of participants chose the worst offer, despite being given the time and opportunity to review the disclosure information
• when able to choose from three policies, 35% chose the worse policy and only 46% found and selected the best policy;
• there was no simple and consistent effect of disclosure – while participants were more likely to forego purchasing an insurance policy when they had only access to the PDS the results did not find a clear pattern of understanding where people were provided more or less disclosure information
• purchasing decisions were not affected by the way in which the consumer viewed the disclosure (i.e. computer or smart phone)

The study was supported with funding from the Financial Rights Legal Centre a community legal centre that specialises in helping consumers understand and enforce their financial rights, especially low income and otherwise marginalised or vulnerable consumers. This funding was in turn sourced from over-collected fire services levies distributed in accordance with a process set up by the Victorian fire services levy monitor for projects benefitting Victorian consumers of insurance.