The following is an opinion article from Charlotte Halkett, MD buzzvault Insurance, who looks at the UK contents insurance protection gap and its effect on different demographics. The views expressed within the article are not necessarily reflective of those of Insurance Business.
We’ve all experienced the frustration of having too much stuff. Searching for passports, tidying up before the in-laws arrive, or trying to find homes for the latest birthday and Christmas gifts. We can accumulate possessions easily, and rarely consider the impact on the value of our home contents.
There are 27.2 million households in the UK, which means that there are at least 26,112,000 TVs, 26,384,000 washing machines and 12,512,000 dishwashers. And in terms of electronics, the UK is apparently home to 41,000,000 smartphone users, 37,600,000 laptop users and 32,800,000 tablet users. We are a nation of 25 million bike owners, 1.5 million golf players and 825,000 tennis players, so we’ve got a fair bit of sporting equipment too.
The Association of British Insurers (ABI), in its recent Britain Uncovered study, put the value of contents stashed in UK homes at an average of £35,000 per home, outstripping the average UK salary of £27,000. The study also found that 28% of UK households had no contents insurance whatsoever. That leaves 16 million people and £266 billion worth of household possessions unprotected. And of course, that doesn’t account for the many under-insured households.
This contents protection gap has different causes – and solutions – for different people.
According to the Improving the Financial Health of the Nation report by the Financial Inclusion Commission (FIC), 81% of “generation rent”, that’s 10.5 million people, do not have contents insurance.
It has been shown that purchasing a home is a major trigger for taking out contents insurance. Most home contents insurance is sold as a bundle with buildings insurance, as mandated by mortgage providers. So, while homeowners can be practically encouraged to take out contents insurance, renters may not consider it essential – if they consider it at all.
Frequently, insurers are not only failing to offer the right products but failing to package and market their products in a relevant, customer-friendly way. The Financial Conduct Authority (FCA) classifies two thirds of renters as potentially vulnerable to harm due to low levels of financial capability & resilience, health issues or risk of life events creating difficulties. Contents insurance could provide a significant umbrella.
The FIC’s Improving the Financial Health of the Nation report also shows that only 39% of those earning £15,000 or less each year have contents cover, compared to more than 78% for the highest incomes. These households are also less likely to have the savings required to cover the cost of any loss or damage if an incident does occur.
Lower-premium products need to be made economically viable. That means new distribution mechanisms to achieve scale, reduce cost and reach people regardless of their level of financial education.
Over 80% of homeowners have some form of contents cover in place. However, these customers often have inadequate cover for the value of their contents, leaving households at risk.
According to a poll of 2,000 Britons by insurance broker Swinton Group, over the past three years 6% of people have missed a typical pay-out of £1,000 from their home insurance providers because they haven’t bought the right level of cover.
A one-size-fits-all approach to contents insurance doesn’t just lead to poorer households paying over-the-odds. It can also lead to wealthier households paying too little and suffering the consequences when they claim.
Contents insurance of the future
The market cannot wait for consumers to suddenly understand the complex details of insurance and why it is important, but should instead be looking at ways to take insurance to the public, presented in a new, accessible and tailored way. Embedding into other services which customers do care about is just one tactic to improve take-up and reduce uninsurance and underinsurance.
To fight the battle against underinsurance, buzzvault is pioneering a new approach that matches contents cover to customers’ individual needs, whatever they own. There is a long way to go in changing public perceptions, but with new tools, tech and insights available, insurance providers are now better placed than ever to provide bespoke, attractive, affordable and – above all – appropriate, home contents insurance.