European Insurance and Occupational Pensions Authority study urges clearer home insurance IPIDs on natural catastrophe coverage

The European Insurance and Occupational Pensions Authority (EIOPA) published a study on how home insurers disclose natural catastrophe (NatCat) coverage in Insurance Product Information Documents (IPIDs), concluding that while good practices exist, disclosures are often not sufficiently clear or consumer-friendly to support informed decisions. EIOPA warns that shortcomings can leave consumers uncertain about protection for perils such as floods, fires or landslides and can contribute to an “insurance illusion” where policyholders mistakenly assume they are covered. EIOPA analysed IPIDs and home policy terms and conditions across eight European countries against a backdrop of more frequent and damaging NatCat events and statistics showing that only about a quarter of NatCat losses in Europe have been insured in recent decades. Observed weaknesses included vague and inconsistent language, heavy reliance on separate policy documentation, widely varying or only partially explained NatCat definitions, and exclusions that were not made explicit in the IPID, such as “flood” coverage that excludes precipitation-related floods. The review also found that optional add-on NatCat cover was sometimes not clearly presented as optional and that coverage limitations, including geographic or frequency-related restrictions, were not consistently disclosed, with examples such as hail payouts limited to once every five years not being specified in the IPID.