Insurance Times speaks to startup insurtech Arma Karma on the importance of insurance not being viewed as a ‘grudge purchase’ by 18 to 35-year-olds

The UK insurance industry must educate young adults aged between 18 to 35 to eliminate the “bad name” it has with this demographic and abolish the stigma of “nonsense” that this age group cannot obtain suitable cover because it poses a heightened risk for insurers, according to Ben Smyth, chief executive of MGA Arma Karma.

Smyth believes that 18 to 35-year-olds should not, in fact, be viewed as “a high risk area”. 

He explains: “A large percentage of their worth effectively comes [through] laptops, phones, musical instruments and glasses, [for example].

“Typically, what they carry on themselves is a high proportion of what they own in total, so they need cover more than anyone.

“The reason why they’re seen as a high risk segment is because the existing insurance players haven’t catered for them properly.”

Smyth therefore believes that flexible, ethical insurance propositions paired with pre-policy purchase education could be a “huge” opportunity for encouraging young adults to buy insurance.

Knowledge gap

MGA and insurtech Arma Karma first came to life in May 2019 as a result of university friends Smyth and chief financial officer Chris Frogner wanting to transform the current UK insurance industry and address what they perceived to be a gap in the market around insurance offerings for young adults - especially as the duo themselves had heard “alarm bells” after not previously buying their own insurance policies.

The company offers montly insurance subscriptions targeted at young professionals, renters and students.

Citing research published in 2017 by broker CoverBuilder, Smyth explains that many 18 to 35-year-olds think that buying contents insurance is “pointless” - they view it as a “grudge purchase” that “doesn’t match [their] lifestyles”, he adds.

This was a recurrent theme within Smyth and Frogner’s own market research, which the pair conducted as part of the business’ soft launch in April 2021.

Frogner says the Arma Karma team would “literally just walk outside with clipboards, give out surveys and get direct customer feedback”, taking full advantage of the MGA’s headquarters’ location in the Innovation Centre at the Colchester campus of the University of Essex.

One of the biggest findings Smyth and Frogner gained after polling students was that “insurance knowledge and knowing what insurance actually is” was not evident for this demographic, says Symth.

He continues: “Most people haven’t heard of or dealt with insurance before within that age segment. So, we needed to educate before we could sell and that’s something that was key early on.”

Extending cover

Arma Karma struck a deal with underwriter UK General Insurance (UKG) in December 2021 to create a personal possessions product for students, young professionals and renters.

Underwritten by UKG and insured through Watford Insurance Company Europe, the policy provides theft, loss and accidental damage cover for up to five personal belongings, inside and outside the home.

According to Frogner, this proposition provides flexibility and empowered the MGA to “change the cover slightly to cater for a broader range of valuations”.

Frogner continues: “Do you really want to get a complex insurance policy that covers a limit of £20,000 and you’re covering your landlord’s sofa? No.

“The items that are covered - like laptops, phones and headphones - are more likely to cause a claim outside of the home, like dropping it on the ground or leaving it on the bus.

“That’s where you’re likely to run into issues and very often, contents insurance policies don’t cover that stuff unless you manually add it.”

Arma Karma received its B Corporation certification on 14 February 2022. Created by non-profit network B Lab, the certification recognises organisations’ social and environmental performance. Frogner emphasises that the certification demonstrates that “we really do care”.