Grappling with insurance in a strange country and in a different language can be overwhelming for many new immigrants. So why is the industry not serving them better?
Bright, ambitious and driven, psychologist Daniela Najdenowa is brimming with enthusiasm about her new life in the UK. Despite having only arrived six weeks ago from Poland, she has spotted a market niche and is forging plans to set up a psychotherapy practice. “There are a lot of Polish people here in the UK and many need to confide in someone in their own language,” she says.
But one thing is dampening her spirit – insurance. For migrants like Najdenowa unused to compulsory insurance in their homeland, grappling with UK requirements can prove a minefield.
She is, however, representative of migration trends that could see cross-border workers in the EU soar to 100 million by 2060. In contrast, falling birth rates and an ageing population mean the indigenous working population in the UK looks set to plunge. According to “Ageing and Migration Trends: Preparing for Change in the EU’s Labour Market”, a new report from Chatham House commissioned by the Chartered Insurance Institute (CII), this growing demographic could close the looming gap caused by the “greying” domestic market.
But it also poses many challenges. Vanessa Rossi, senior research fellow in international economics at Chatham House and principal author of the report, believes the insurance sector needs to create a new range of products to suit different nationalities and situations.
Short-term migrants will have basic but fundamental needs; providers of car, accident and health insurance in particular could reap the benefits if they tailor their products correctly. “There may be increasing requirements for people to be covered even if they are not long-term residents,” she says. “Migrants who are here for the short term will be looking at how portable their policies are.”
Meanwhile, Najdenowa, who is working as a translator to raise funds for her practice, has struggled to find the best deals on car and public liability insurance. She believes insurance lags behind in catering for migrant groups, especially with language assistance. “My English is good but there are still terms that I don’t understand,” she says. “The language barrier is the biggest problem for many immigrants. I spoke to several people who need to get their cars insured – there is a big issue when they can’t communicate their problems with the insurer.”
She says more sensitivity also is needed when it comes to understanding cultural scruples about insurance. Poland requires only a compulsory minimum level of third-party motor insurance where the insurance is with the “car” and not with the “person”, as in the UK. In Poland anyone can drive a car if it has a policy. According to an Aviva survey undertaken in 2007, fewer than three in ten drivers have fully comprehensive cover compared with eight out of ten in the UK.
“People in Eastern Europe have a completely different view of insurance. They don’t want or need it,” says Najdenowa. “In the UK, there needs to be more communication from providers about what types are compulsory, and what the benefits are of having it.”
The recession has stemmed the tide of migrants looking to work in the UK, leading to the belief that work in this area is no longer profitable. But Rossi warns providers against taking a short-term view. “When the flow bounces back you will have a very important segment moving around Europe in a more fluid way.”
David Thomson, director of policy and public affairs at the CII, believes it would be a mistake to ignore these trends. “While it is an oscillating population, the market will grow and can be quite lucrative for those who recognise it and exploit it in a commercial sense.”
Elsewhere, Peter Staddon, Biba’s head of technical services, is confident that brokers are well equipped to meet the challenges. “We have a diverse membership that speaks many tongues,” he says. However, he disagrees with the CII’s assessment that new products are essential to navigate this market. “I’m not sure we need additional products. The focus will be on how these products are supported.”
He is critical of complacency when it comes to embracing specific cultural needs. In particular he says companies should develop products that comply with Sharia, the legal framework of the Islamic faith which bans the payment of interest on financial products. “I was speaking to one broker who asked why bother investing in Sharia-compliant products when there are only 400,000 Muslims in the UK. But there are 16 million Muslims in Europe. There is no reason why we should only be looking internally.”
Peter Smits, the managing director of Ashbourne Insurance, believes that brokers are ideally placed to take advantage of the migrant market. “It lends itself well to our type of business. Our experience shows it is important for that market to have a relationship with the people they are dealing with,” he says. “They are not interested in the current trends for online offerings and faceless call centres. The language issue can be a barrier, but the fact that business is done face-to-face helps smooth the relationship.”
A spokesman for Aviva says the insurance giant is ready to tailor products more effectively for this demographic. “Where brokers have expressed a need for literature to be tailored to address any language barriers, we work very closely with them to ensure we meet the needs of our customers wherever we can.”
Despite her frustration, Najdenowa is fully aware of the long-term advantages of embracing a culture in which ensuring maximum cover is the norm. “You don’t have to worry about money and about how to survive. It makes life less stressful and easier.”
Rossi adds the industry will have to come to terms with catering for this potentially lucrative, albeit higher risk, market as the trend for high levels of migration are here to stay. “You may never have the same stability of the old population models,” she says.
Smits puts it bluntly. “If you are ignoring this market, you are ignoring a potential source of business and we can’t afford to do that.”
Changing Times: Targeting short-term migrant workers
A changing population will require companies to review their strategies for identifying customer needs. More flexible and transferable products, with speedy assessments, are essential for targeting short-term migrant workers. Cover for remittances and current accounts will be important for newly arrived migrants, while longer-term residents will become a focus for providers of life and repatriation insurance. Security for credit cards, personal loans, pension and mortgage plans should also be in demand.
Greater flexibility across the EU is a bonus in this market. Under EU regulation, compulsory civil liabilities and additional insurances can be bought in any member country, provided the company has established an office or designated a representative in that country. Companies that take this step are set to attract a higher number of mobile European customers.
From 2013, European legislation will provide for a single driving licence to replace the 100-plus licences in use. This will make it easier for car insurance providers to avoid becoming victims of “driving licence tourism”, when a disqualified driver from one country can obtain a fresh licence in another member state.