Residential policies need to be simplified because customers are confused about what their policies protect, said Benjamin Lawsky, superintendent of New York's Department of Financial Services, in an exclusive interview with Bloomberg.

According to Lawsky—who said Superstorm Sandy brought to light insureds' confusion regarding their homeowners policies—standardizing health plans makes it easier for consumers to find the best options, and the same principal can be applied to homeowners insurance.

"There's room for greater standardization," Lawsky told Bloomberg. "We're doing it for health insurance and we need to ask, 'Why not move in the same direction for homeowners' policies?'"