South Carolina Code of Regulations
Chapter 69 - DEPARTMENT OF INSURANCE
69-5.1 - Minimum Standards for the Readability of Commonly Purchased Insurance Policies.
69-5.1. Minimum Standards for the Readability of Commonly Purchased Insurance Policies.
A. Purpose: The purpose of this Regulation is to establish minimum standards of readability applicable to all commonly purchased personal policies, contracts and certificates of insurance delivered or issued for delivery in this State.
This Regulation is not intended to increase the risk assumed by insurance companies or other entities subject to this Act or to supersede their obligation to comply with the substance of other insurance legislation applicable to such forms of insurance policies. This Regulation is not intended to impede flexibility and innovation in the development of policy forms or content or to lead to the standardization of policy forms or content.
A policy is a legal document. Revision of the policy to make it more readable must not lead to its devaluation as a legal document. The policy must comply with all statutory and regulatory requirements.
B. Definitions—As used in this Regulation:
(1) ''Director'' is as defined in Section 38-1-20.
(2) ''Policy'' or ''Policy Forms'' means any policy, certificate, rider, amendment, endorsement, contract, plan or agreement of personal insurance, and any renewal thereof including homeowners, dwelling fire, automobile, accident and health, life and all other forms of personal insurance delivered or issued for delivery in this State by any company subject to this Regulation; any certificate, contract or policy issued by a fraternal benefit society, and any certificate issued pursuant to a group insurance policy delivered or issued for delivery in this State. The Director may add other policies as he deems advisable.
(3) ''Company'' or ''Insurer'' means any life and health, accident, property and casualty, title or marine insurance company, reciprocal, county mutuals, fraternal benefit society, nonprofit health services corporation, nonprofit hospital service corporation, nonprofit medical service corporation, prepaid health plan, dental care plan, vision care plan, pharmaceutical plan, health maintenance organization, and all similar type organizations.
This Regulation shall apply to all policies delivered or issued for delivery in this State by any insurer on or after the date such forms must be approved under this Regulation, but nothing in this Regulation shall apply to:
(1) Any policy which is a security subject to federal jurisdiction;
(2) Any group policy; however, this shall not exempt any certificate issued pursuant to a group policy delivered or issued for delivery in this State or mass marketed certificates subject to approval by this Department;
(3) Any group annuity contract which serves as a funding vehicle for pension, profit-sharing, or deferred compensation plans;
(4) Commercial, fleet vehicle and incidental personal coverages which are a part of a commercial policy;
(5) Any life, accident and health form used in connection with, as a conversion from, as an addition to, in exchange for, or issued pursuant to a contractual provision for, a policy delivered or issued for delivery on a form approved or permitted to be issued prior to the date such forms must be approved under this Regulation;
(6) Renewal of a life or accident and health policy delivered or issued for delivery prior to the date such forms must be approved under this Regulation;
(7) Surety or fidelity bonds.
D. Minimum Policy Readability Standards:
(1) In addition to any other requirements of law, no policy forms of personal insurance except as stated in Section C, shall be delivered or issued for delivery in this State on or after the dates such forms must be approved under this Regulation unless:
(a) The text achieves a minimum score of 40 on the Flesch Reading Ease Test or an equivalent score on any other comparable test as provided in subsection (3) of this Section;
(b) It is printed, except for specification pages, schedules and tables, in not less than ten point type, one point leaded;
(c) The style, arrangement and overall appearance of the policy give no undue prominence to any portion of the text of the policy or to any endorsement or riders; and
(d) It contains a table of contents or an index of the principal sections of the policy, if the policy has more than 3,000 words or if the policy is printed on more than three pages.
(2) For the purposes of this Section, a Flesch Reading Ease Test Score shall be measured by the following method:
(a) For a policy containing 10,000 words or less of text, the entire policy shall be analyzed. For a policy containing more than 10,000 words, the readability of two 100-word samples per page may be analyzed instead of the entire form. The samples shall be separated by at least 20 printed lines.
(b) The number of words and sentences in the text shall be counted and the total number of words divided by the total number of sentences. The figure obtained shall be multiplied by a factor of 1.015.
(c) The total number of syllables shall be counted and divided by the total number of words. The figure obtained shall be multiplied by a factor of 84.6.
(d) The sum of the figures computed under (b) and (c) subtracted from 206.835 equals the Flesch Reading Ease Test Score for the policy form.
(e) For purposes of this Section, the following procedures shall be used:
(1) A contraction, hyphenated word, numbers and letters when separated by spaces shall be counted as one word;
(2) A unit of words ending with a period, semicolon, or colon, but excluding headings and captions shall be counted as a sentence;
(3) A syllable means a unit of spoken language consisting of one or more letters of a word as divided by an accepted dictionary. Where the dictionary shows two or more equally acceptable pronunciations of a word, the pronunciation containing fewer syllables may be used.
(f) The term ''text'' as used in this Section shall include all printed matter except the following:
(1) The name and address of the insurer; the name, number or title of the policy; the table of contents or index; captions and sub-captions; specification pages, schedules or tables;
(2) Any policy language which is drafted to conform to the requirements of any federal law, regulation or agency interpretation; any policy language required by any collectively bargained agreement; any medical terminology; any words which are defined in the policy; and any policy language required by law or regulation; provided, however, the insurer identifies the language or terminology excepted by this subsection and certifies, in writing, that the language or terminology is entitled to be excepted by this subsection.
(3) Any other reading test may be approved by the Director for use as an alternative to the Flesch Reading Ease Test if it is comparable in result to the Flesch Reading Ease Test.
(4) Any non-English language policy delivered or issued for delivery in this State shall be deemed to be in compliance with Section D(1) of this Regulation if the insurer certifies that the policy is translated from an English language policy which complies with Section D(1) of this Regulation.
(5) Filings subject to this Section shall provide the actual score or be accompanied by a certification signed by an officer of the insurer or filing organization stating that the policy form meets the minimum requirements of Section D(1). Such certification shall state that the policy form meets the minimum reading ease test score on the test used or that the score is lower than the minimum required but should be approved in accordance with Section E. To confirm the accuracy of any certification or score, the Director may require the submission of further information to verify the certification or score in question. If it is necessary to alter coverage, such change must be noted and explained upon submission for filing.
(6) At the option of the insurer, riders, endorsements, and other forms made a part of the policy may be scored as separate forms or as part of the policy with which they may be used.
E. Powers of the Director: The Director may approve a policy which does not meet the minimum Flesch Reading Ease Test Score required herein whenever, in his sole discretion, he finds such approval:
(1) will provide a more accurate reflection of the readability of a policy form;
(2) is warranted by the nature of a particular policy, or
(3) is warranted by certain policy language which is drafted to conform to the requirements of any State law, regulation or agency interpretation.
F. Approval of Forms: A policy meeting the requirements of Section D(1) shall be approved, notwithstanding the provisions of any other law which specify the content of policies, if the policy provides the policyholders and claimants protection not less favorable than they would be entitled to under such laws.
G. Effective Dates:
This regulation, as amended, becomes effective upon publication in the State Register.
H. Penalties: Any insurer who violates the provisions of this regulation shall be subject to the penalties set forth in Section 38-2-10 of the Code of Laws of South Carolina 1976, as amended.
HISTORY: Added by State Register Volume 3, eff July 13, 1979. Amended by SCSR 44-6 Doc. No. 4931, eff June 26, 2020.