MPs urge insurance sector to focus on financial inclusion

Recent flooding has served as a reminder that contents insurance for tenants is a protection gap that the industry needs to tackle, according to Aon UK chief executive officer, Julie Page.

Page continued: “Not only does it hurt most in that protection gap, but it’s also more likely to happen.

“If we look at those lower income families, what we see is a much higher likelihood of fire and burglary. This protection gap is wholly solvable.”

Lower income
The comments were made as Aon and Aviva hosted an event at Parliament yesterday (2 March) in a push to encourage social landlords to make use of its tenants contents insurance (TCI) initiative.

The two firms work with local authorities and housing associations across the UK to provide affordable insurance to social housing tenants through TCI schemes.

The schemes enable lower income families to get insurance through their councils or housing associations for as little as £1.20 a week.

Recent research by WPI Economics for Aviva showed that the proportion of tenants who buy contents insurance remains very low, with 61% of UK renters with an annual household income of less than £17,000 going without contents insurance.

Inclusion
Speaking at the event, John Glen MP, economic secretary to the Treasury, urged the insurance sector to focus on initiatives to improve financial inclusion.

He said: “A thriving financial services sector is critical and generates massive amount of tax revenues.

“But I want you to be focused on these sorts of initiatives which are transforming the lives of vulnerable people.”

Glen continued: “My job is to look at how we can empower competition, but also assist with innovations such as this, which Aon and Aviva have embraced together and separately to improve the take-up of insurance for those individuals who are tenants who haven’t taken that up to this point.

“It’s important to remember that the goal is to create a situation where it becomes the norm for tenants to take out contents insurance, at about £1.20 to £1.40 a week, in order that they can have some resilience in their personal finances.”

Challenges
In addition, Conservative MP Craig Tracey, chair of the All-Party Parliamentary Group for insurance and financial services and a former insurance broker, noted that there are some challenges for the industry to overcome.

“The digital revolution has been largely positive and has brought some really good new opportunities, but where it has brought issues is that we lose that interaction with the customer, which is particularly significant for vulnerable customers,” Tracey stated.

He added that the insurance industry and regulation has “not kept up with the pace of change”.

Tracey concluded: “That has a knock-on effect, people aren’t necessarily comfortable with buying insurance so they do without the cover.

“There are real opportunities to change for the industry, particularly around customer engagement.”

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