Insuring the underclass

More than one-third of people living in low income households have no insurance of any kind, compared to just five per cent of people living in households with an average income, the ABI revealed this week.

It has been compiling research on the “insurance underclass” in response to the government’s push to increase financial inclusion – that is, to ensure people have bank accounts, savings and of course insurance.

The obvious question may be – so what? The fact that some people with little money either do not want, or do not fully understand, the benefits of insurance, is hardly revelatory. These people are not the insurance market’s natural clients: they have little money to pay premiums and are at a much higher risk of being victims of crime than those on average incomes.

But there are two good reasons to take notice of this research. This first is that the government, for reasons of social justice, is determined to extend the benefits of financial services to those on lower incomes. The industry cannot avoid working with the government, so it may as well be a pro-active force, working in partnership with government to cut crime rates and market products that will make money.

The second is that there is a massive untapped market out there: the forward-thinking business will have little or no competition, and may gain customers that will stay loyal as they move up through the income brackets.

The ABI has pledged to lead the charge on this. It aims to improve the take up of “insurance with rent” products, whereby social housing tenants pay a small premium with their rent, to their landlord, for a basic cover. It will also work with intermediaries such as credit unions to reach those people who have no other contact with financial services and encourage insurers to market low cost products, particularly for home contents insurance. With potential benefits for both the bank balance and the conscience, why not get involved?