‘Generation Rent’ is the title which defines a demographic of society, made up particularly of younger people, who, due to high house prices and high rents, are not able to save for their first home and are instead renting for extended periods of their lives. According to RenKap, since 2001, the number of households in the private rented sector has doubled, while homeownership has substantially reduced.
The CEO and co-founder of the London-based insurtech Urban Jungle, Jimmy Williams (pictured), believes that Generation Rent is getting a raw deal from this situation and that the “big guns” of the insurance industry must adapt or expect to lose out. When this business first started life, it was founded on a dual approach. Firstly, the opportunity for technology to automate processes within the insurance sector and make products structurally cheaper for the end customer. And secondly, the need for enhanced customer connections.
“The insurance industry has had a very long history of being intermediated,” Williams said, “whether that’s through the broker sitting between the insurer and the customer and arranging the policy, or more laterally through a price comparison site. As a result, when you look at insurance companies, there aren’t a lot of people really championing the customer there. And certainly, they tend not to be in senior positions; those roles belong to the actuaries or the underwriters, not to marketing people or customer-focused people. And, as a result, you’ve got this kind of one size fits all product in insurance.”
The majority of the larger, traditional insurers do not have a policy which specifically facilitates young renters or people living with different living conditions, he said. Instead, they have one policy which is applied to everyone and, if you look at other consumer sectors, this is just not tenable. This lack of customisation is the opposite of where every other sector is heading, where products and services are becoming much more personalised in order to appeal to a particular consumer segment.
The future is insurance products which are built from a great understanding of the end customer, Williams noted, and which keep in the mind not only their living situation but also how quickly this can change. The importance of this innate flexibility has been highlighted by the COVID-19 pandemic which has seen the situation for homes up and down the country, and the lifestyles of those living in those homes, change dramatically in recent months.
When initially explaining the proposition of Urban Jungle to the more traditional insurance companies, and outlining how the business aims to appeal to the younger generation and hold their business through the creation of strong brand loyalty, the underlying prejudice that exists against young people when it comes to housing became very clear. Williams noted that the negative view of this demographic was not data-driven but instead based on a series of assumptions.
“I think there’s a lot a lot of that flying around in the industry,” he said, “particularly against young people. It’s a bit of a ‘young drivers’ thing. And young drivers are quite inexperienced but it’s their inexperience that makes them crash more often. It’s not as though people are inexperienced at living in a house, which is what we’re insuring them for.
“So, we found that prejudice to be quite significant. We’ve looked closely at how other insurers price these policies, and housing tenure is always priced on marital status. We think there is something very wrong in being priced on things that you can’t control. If you were applying for a job and someone discriminated against you on the basis of your marital status, that would be so illegal - but in insurance, this happens every day.”
The EU changed the law around gender discrimination in motor insurance several years ago, Williams noted, and it would have been expected that this would flow through to housing but it hasn’t. He believes that the models used by some insurers are discriminating based on gender. Urban Jungle has established itself on the foundation of trying to be fairer, and not weaponising irrelevant information against its customers, with the view that the way to write risk is simply to use data.
“There should basically be a presumption that anyone is a good risk until proven otherwise,” he said. “And we have had pushback from the industry on that, but, you know what, our loss ratio is great. And of course, we do find pockets of behaviour among customers that is negative and we’re good at identifying people who are doing fraudulent things.
“But, in our view, that is typically borne out by their behaviour and has nothing to do with their marital status or their living situation. We’ve got a slightly different underwriting approach in that we’re trying to use modern fraud screening techniques to identify potential fraud rather than just saying, ‘there may be a higher incidence of fraud in this demographic, so let’s just not help that demographic’. Instead, we’re looking for the fraudsters committing fraud rather than just saying ‘no’ to vast swathes of the population.”