BLOG: Now is the time to fill in the 'missing piece'

November 23, 2017

It is a week now, since the launch in the House of Lords last week, of the Financial Inclusion Commission’s report on The Missing piece in the Financial Inclusion Debate? Improving access to Household Insurance.  It has been a busy week, with good coverage on news websites and on Radio 4. The report was also very well received at a meeting of the All Party Parliamentary Group on Insurance and Financial Services, this week.

The launch event went well, with standing room only, very unusual for an event relating to insurance, especially in a parliamentary setting!  A wide cross section of interests was represented – a number of prominent parliamentarians, representatives of consumer interests, Government departments, the third sector, and the industry.

The primary purpose of the report – to highlight the gap in many peoples’ ability to be financially resilient, especially against the sort of financial shocks that can follow deeply affecting physical shocks from fire, flood or burglary – was accepted as valid by all sides. 

The bald statistics show that, as was said, the gap amounts to ‘financial exclusion on a grand scale’: 16 million adults with no protection, including a quite staggering proportion of people renting. 10.5 million out of 14.5 million people living in rented accommodation have no insurance of their possessions and stand to lose everything, if the worst happens. 

Although a surprisingly large number of owner occupiers – 5.2 million – don’t have any cover, either.

And the people who don’t have the cover are those most likely to suffer a loss: younger people and lower income households are over-represented. Families in lower income areas are twice as likely to be burgled, 8 times more likely to suffer flooding, and a quite staggering 30 times more likely to be victims of arson.

There are problems of availability of cover, of affordability, real or perceived, narrowing of channels with increasing digitalisation, a lack in trust of the industry which is understandable,even if disproportionate to the actual experience of most claimants. And ‘big data’ seems to be pushing more people who are ‘non-standard’ risks, towards the margin.

But it is not as if good value products are not out there, if people can find their way to them. For example, a family living in social housing in Glasgow can get £10000 of cover against the worst emergencies for 50p a week. Yet despite cover being available to around 85% of social tenants, typically only 10% -15% take it up.

The kind of solutions advocated in the report – better signposting towards alternative providers, if someone is turned down for cover, bundling ‘insurance with rent’ on an ‘opt out’ rather than ‘opt in’ basis, or perhaps even a wholesale review of whether the current market-based model can ever work for the most difficult to get at groups, were seen as a sensible basis for continuing work.

As was said at the conclusion of the meeting, 10 years ago, three of the most intractable access and inclusion problems in financial services were: building pension provision for low paid employees of SMEs; providing cover against floods for people in flood affected areas; and making banking services – essential to financial inclusion – available to millions of unbanked people.  Sound solutions have been found to all of those, in recent years. It can’t be beyond the imagination and ability of a combined effort of Government, industry and regulators, to fill in the ‘missing piece’.