Have you ever listened to someone speaking a language you don’t understand? You recognize the sounds, and you know they’re forming words and sentences, but your brain just can’t make sense of them. To you, it’s just noise, yet to someone else, it’s a meaningful conversation.
This disconnect hit home recently when I watched a viral video called “How English Sounds to Non-English Speakers”. The video mimics the rhythm and cadence of English, but most of the words are made up or jumbled. They’re just close enough to sound familiar, yet they’re completely nonsensical. Occasionally, a recognizable word slips in, but it’s out of place or context.
While watching it, I had a realization: this is exactly how insurance policies can feel to the average insured. Yes, the documents are written in English, but to someone unfamiliar with the industry, they might as well be written in another language. And when something goes wrong, like a denied claim or an uncovered loss, that language gap can become the core of a lawsuit.
The irony is that these documents are built to protect insurers, agents, MGAs, and carriers from risk, but their complexity can create risk by fueling misunderstandings that lead to E&O claims, coverage disputes, and reputational damage that’s extremely difficult to repair.
In this article, we’ll explore this parallel, diving into how this communication breakdown can expose insurance providers to legal risks, and more importantly, how you can proactively protect your business by speaking the insured’s language.
Clear Language is the Difference Between Creating Better Boundaries VS Legal Minefields
Strong policy language benefits everyone involved. Insureds have better visibility into what they’re buying or renewing, and insurers can point to exact phrasing when coverage decisions are challenged. This is especially important when denials happen in emotional contexts, like after a disaster, accident, or theft.
The main takeaway? Vague or overly broad language creates room for misunderstanding. When a policy doesn’t match the real-world scenario cleanly, insureds often rely on assumptions, marketing language, or verbal explanations from their agent. These gaps open the door to complaints and lawsuits.
On the other hand, written policies that leave little room for interpretation help insurers resolve claims more efficiently and defensibly.
The Gap in Translation and How Misunderstanding Breeds Risk
Let’s take a look at this from two perspectives: the precise language of a written policy and how that same language could be interpreted by an insured. Our team asked AI to create an example excerpt of a homeowner’s policy; this is what it produced:
Simplified Homeowner’s Insurance Excerpt:
COVERAGE A – DWELLING
We cover the dwelling on the “residence premises” including structures attached to the dwelling.
COVERAGE B – OTHER STRUCTURES
We cover other structures on the residence premises set apart from the dwelling by clear space (e.g., detached garage, shed).
COVERAGE C – PERSONAL PROPERTY
We cover personal property owned or used by an “insured” while it is anywhere in the world.
COVERAGE D – LOSS OF USE
If a covered loss makes the residence premises uninhabitable, we cover:
- Additional living expenses;
- Fair rental value.
SECTION I – EXCLUSIONS
We do not cover loss caused directly or indirectly by any of the following:
- Earth Movement – Including earthquake, landslide, mudslide.
- Water – Including flood, surface water, waves, tidal water, overflow.
- Neglect – Failure to use reasonable means to save and preserve property.
- War, nuclear hazard, or government action.
Where Misunderstanding Begins (an Insured’s POV According to AI)
After AI created the example policy above, the ePayPolicy team then asked it to read the policy from an insured’s perspective with the following prompt:
“Create a sample insurance policy clause, like something you’d see in a homeowners policy. Then, read that same clause from the perspective of an average insured. How might they misunderstand or interpret the language?”
Below is the AI’s response, showcasing how an average insured might understand (or misunderstand) the original homeowner’s policy clauses.
COVERAGE A – DWELLING
“Okay, so my house is covered. That means if anything happens to it — fire, storm, tornado, whatever — insurance will pay for it. Right? It just says it covers the house, so I’m good.”
COVERAGE B – OTHER STRUCTURES
“My garage and shed are covered, too. I’m not really sure what ‘clear space’ means, but they’re on my property, so they must be included.”
COVERAGE C – PERSONAL PROPERTY
“This says my stuff is covered anywhere in the world — so if my laptop gets stolen from my car while traveling, they’ll pay for that, no problem. Right?”
COVERAGE D – LOSS OF USE
“If something happens and I can’t live in my house, they’ll pay for a hotel or Airbnb. Not sure what ‘fair rental value’ means, but at least I know I won’t be out of pocket.”
SECTION I – EXCLUSIONS
“Okay, they don’t cover earthquakes or floods — I’ve heard that before. But everything else should be covered. It doesn’t say anything about tornadoes, hail, or wind, so I’m assuming that kind of stuff is included.”
(Pause)
“Wait… ‘failure to use reasonable means to save and preserve property’? What does that mean? If I didn’t board up my windows before a storm, will they say that’s neglect and deny my claim? That feels really vague.”
Words are misinterpreted, assumptions are made, and what you may have thought was crystal clear policy for one insured is now your most significant liability. Now imagine that confusion multiplied across hundreds of policies, agents, and claim situations. The result? Anger. Mistrust. Lawsuits. And a lot of E&O exposure.
A Painful Reality for Agents and Everyone Upstream
Our team recently attended a live session led by Keith Jones from Florida State University’s Department of Risk Management/Insurance, who emphasized that when communication breaks down, liability trickles up. While agents are on the front lines, carriers and MGAs aren’t immune.
Here’s what Keith highlighted as the most common E&O exposures:
- Negligent misrepresentation by using overly complex language that the insured doesn’t understand
- Application errors and mistakes that result in big losses at claims time
- Failure to procure adequate coverage or limits, especially when not well documented
- Delays in notifying the carrier that can result in missed opportunities to deny appropriately
- Documentation failures (if it’s not in writing, it didn’t happen)
- Lack of managerial oversight, especially when quoting or binding
He also noted that unauthorized entities sometimes bind coverage or quote incorrectly, which can lead to an agent (or an MGA) being held personally liable if a claim isn’t paid.
So, How Do We Fix the Translation Problem?
It starts with recognizing that you may be “fluent in insurance”, but your client isn’t. In fact, there’s a high probability that if you’re reading this right now, you’ve been in the industry for years, surrounded by the terminology and jargon, which highlights your extensive knowledge. But this very expertise can also become your blind spot.
Here are Keith’s recommended best practices:
- Keep detailed records of every interaction (calls, emails, documentation, and confirmations).
- Send yearly policy updates to maintain alignment and uncover new exposures.
- Deliver policies with care (avoid just mailing or emailing them).
Verify:
- Effective dates
- Coverage limits
- Named insureds
- Volumes and contact info
- Effective dates
- Use declination forms with client signatures. If they refuse to sign, document it in your AMS.
- Maintain clean, up-to-date websites with:
- Privacy statements
- Clear explanations of product offerings
- Privacy statements
- Educate proactively through blogs, FAQs, and one-pagers that serve as evidence of “client education” if a claim is disputed.
- Consider Directors & Officers (D&O) insurance, especially for MGAs and agency leaders.
Carrier and MGA Stake in Clarity
It’s easy and tempting to think after reading all of this, “That’s an agent problem.”, but the reality is miscommunication at the ground level impacts everything from retention, litigation, and brand trust. The insured doesn’t care whether the fault lies with the agency, MGA, or carrier; they just know they’re confused, frustrated, and not getting what they expected.
Insurers who invest in simplifying language, educating their distribution partners, and promoting consistency in documentation protect both policyholders and their business.
The Path Forward
Insurance is an essential safety net. But when policy language creates fill-in-the-blank space for insureds to insert their own assumptions, you’ve already lost their trust, and once trust is broken, so is loyalty. The best defense is making your materials clear now to avoid potential issues down the line. When you prioritize clarity, you’re both protecting against risk and building stronger, more lasting relationships with your policyholders.
Disclaimer: The information provided in this article is for general informational and educational purposes only, and does not constitute legal or professional advice. The examples of policy language and interpretations by AI are hypothetical and should not be relied upon as factual representations of any specific insurance policy. Consult with a qualified legal professional, insurance agent, or carrier for advice tailored to your individual circumstances. ePayPolicy is a technology company and is not an insurance carrier, agent, or broker.
