Has the House of Lords missed what's perpetuating insurance's consumer understanding problem?

The House of Lords' latest report into home and travel insurance regulation raises important questions about consumer understanding, claims acceptance and whether the FCA is doing enough to deliver better outcomes.

Its findings are welcome. But having read the report, I can't help feeling that an important connection has been missed.

We've spent years trying to improve consumer understanding of insurance. Yet we're operating in a market where products are becoming increasingly fragmented, and where even businesses that want to simplify how they communicate with customers can face barriers to doing so.

If we're serious about solving the problem, surely we need to examine what's perpetuating it.

Has product tiering become too accepted?

I've had several interesting conversations with CEOs and senior insurance leaders recently about product tiering. One response has come up repeatedly: it's simply how the industry competes.

There is some important context here. The FCA's General Insurance Pricing Practices (GIPP) rules, introduced in 2022, changed how insurers compete for new business. One consequence was a shift towards launching new products, including different tiers of cover, rather than simply changing prices on existing products. The House of Lords report acknowledges this as an unintended consequence of GIPP.

Our home insurance data shows how quickly the market is changing. By August 2026, around one in five quoting products had been in the market for less than a year. Meanwhile, the share of products with at least three years' quoting history fell from 73% in January 2025 to 58%.

I understand the commercial rationale. But when product tiering is seen as simply how the industry operates, are we asking enough questions about what it means for customers?

Every new tier brings potential differences in cover, exclusions and limits for customers to navigate. The Lords report recognises the growth in tiering, but I think it misses an opportunity to explore what this means for consumer understanding. Competition matters, but so does whether customers understand the protection they're buying.

Even businesses that want to simplify insurance language face barriers

Another recent industry conversation highlighted a different side of the same problem.

I spoke to a contact whose business wanted to overhaul its policy wording, reducing the reading age and replacing complex language with straightforward, plain English explanations.

However, there wasn't the same appetite from the underwriter, and certain wording was understood to be required for legal or regulatory reasons.

It's a telling example of the challenges involved in making insurance easier to understand, even where the desire to change exists.

Policy documents remain lengthy, dense and full of terminology that customers rarely encounter in everyday life. And understanding the words doesn't necessarily mean understanding their real-world implications.

The report highlights an example raised by James Daley concerning travel insurance policies that exclude repatriation following death.

How many customers would think to check for that when comparing policies? More importantly, how many would appreciate the consequences for their family if that protection wasn't included?

We need to get better at helping people understand what exclusions actually mean, rather than expecting them to interpret policy documentation and imagine every possible scenario themselves.

An opportunity to do things differently

This is where I believe AI presents a significant opportunity.

We're already seeing consumers turn to AI during their insurance shopping journeys. We haven't yet explored their motivations in sufficient depth to draw firm conclusions, but it's worth asking whether the complexity of insurance and the overwhelming amount of choice are contributing factors.

Most people don't want to spend hours buying insurance or comparing multiple policy documents. They want confidence that they're buying the right protection.

Imagine if price comparison websites and insurers could build conversational AI directly into their purchasing journeys, allowing customers to explain what's important to them, ask questions in plain English and explore how different policies would respond to real-life scenarios.

Rather than simply seeing that one product is £40 cheaper, a customer could understand exactly what they're sacrificing for that saving.

General-purpose AI brings risks, including inaccurate or invented information. But that strengthens the case for the industry to explore purpose-built tools grounded in verified policy information, with appropriate safeguards and regulatory oversight.

Are we asking the right questions?

The House of Lords has put considerable effort into this inquiry, and its call for greater urgency from the FCA is welcome.

But I worry we're at risk of returning to familiar conversations about disclosure and consumer responsibility without adequately challenging the conditions that make insurance difficult to understand in the first place.

We should be asking whether product proliferation is making comparison harder, what prevents businesses from communicating cover more clearly, and how technology could help customers understand the consequences of their decisions before purchasing.

We cannot continue to acknowledge poor consumer understanding as an industry-wide problem while accepting practices that may contribute to it as simply the way insurance works.

The ultimate test isn't whether we gave customers enough information. It's whether they understood the protection they were buying, including what they were giving up, before they needed to make a claim.