“Sorry, darling, the freezer’s broken”

How would you spend your last few pounds?

Kneeling in a puddle of water, Claire roots through the freezer. Surely there’s something in here she can save.

“Mummy, can we have fish fingers tonight?” The sense of failure takes her breath away. “Sorry, darling, the freezer’s broken.”

When Claire’s freezer breaks, it isn’t just an annoyance. It’s the difference between feeding her family herself and relying on the foodbank.

The last thing on her mind is insurance – why on earth would she spend her money on insurance?  

Anyway, who’s going to insure her?

Insurance: not for me

Claire is far from alone. There are 16 million people in the UK with no household insurance.


Well, what if you don’t have a bank account?

What if there’s no spare cash at the end of the month?

What if no one you know bothers with it and you don’t trust the big companies trying to take your money?

If Claire had contents insurance, her food would be replaced. Her children wouldn’t go to school with a gnawing sense that things aren’t right.

Financial exclusion is a global fight

Globally, around two billion people live without insurance. But things are changing.

Last year, the BBC reported the story of Francis Ahiale who lost his eye after an accident at work. He had used his mobile phone to buy microinsurance through Bima. It meant he could pay his hospital bills. It cost the equivalent of £1 a month.

MicroEnsure is a specialist in inclusive insurance for low- and middle-income groups in Africa and Asia. 85% of their customers have never had insurance before and they offer cover specific cover for things like political violence and crop insurance.

MicroEnsure has partnered with mobile phone network, Telenor India. They’ve launched India’s first mass market free insurance product.

All Telenor’s customers need to do is top up their phone. In return they get life insurance.

The high costs of being poor

Back in the UK, a readers’ survey by ‘Quids In’ magazine found only a quarter (24%) of social housing tenants would be able to replace their washing machine if it broke. Three quarters would be forced to turn to high-risk credit, family or do without.

Association of British Insurers (ABI) research shows:

  • Social rented houses are almost twice as likely to be burgled as owner-occupied.
  • Arson rates are almost 30 times higher in lower-income families.
  • Low-income families are eight times more likely to be living in a flood plain.

Lower-income families face higher risks, which may mean higher premiums. No money. No peace of mind.

A growing number of buy-now-pay-weekly shops offer low-income families the chance to ‘own’, say, a new TV. But the cost of feeling like everyone else is sky high. Weekly payments set out a tantalisingly affordable plan while adding rocketing interest rates.

And if that TV gets stolen, what then?

Affordability is only one part of the story

Low-income families can be some of the best at budgeting you will ever meet. But there’s not a lot they can do about other factors influencing their exclusion.

Insurance is a competitive market. The biggest seller is combined buildings and contents insurance. Convenient for some but useless if you’re privately renting or in social housing. Some people just need to cover their freezer and TV.

Insurers are moving with the times – that means going digital. But what if you have no way of getting online? Or you’re overwhelmed by the thought of it?

Big data. It’s a revolution which means insurers can tailor products and give customers exactly what they need. But what about people who have a low income, a criminal record or live in a high-risk area – can they get a good deal, too?

Really, why should people who’ve never had or wanted insurance hand over their last few pounds to pay for it?  

Karen Arthur, from Aviva’s Tenants' Contents Insurance team says:

“We work with social landlords (via brokers) to provide their tenants with access to affordable and appropriate contents insurance. Our goal is to make sure people whose finances don’t leave them much room for manoeuvre are protected against damage from fire, theft or burst pipes – and, if that bad thing happens, they aren’t left high and dry.

 “We also work with organisations such as the Financial Inclusion commission and charities to raise awareness of the benefits of household insurance.

“For many people without insurance it’s because it’s not something they’ve ever considered. Many are already sure they wouldn’t get cover. There’s a sense of mistrust as well. Thinking big companies won’t pay up. If they have very little money spare then this is often a perceived risk too far. It’s our challenge to show the value.

 “Replacing damaged items can be so difficult when your options for credit are restricted to expensive, higher-cost lenders and rent-to-buy shops.

“Sadly, in some cases, even a lower premium may indeed be too much for a household’s budget.

“This needs to be a public policy issue and I’m so glad it’s forming part of the overall financial inclusion work the government is doing. It’s part of helping people get out and stay out of the cycle of debt.”

Insurance isn't simply a choice

Laurie Edmans is part of the Financial Inclusion Commission, the organisation behind the Improving access to household insurance report. He believes access to products is a big problem.

“At the Financial Inclusion Commission, we’ve seen two main access problems:  products not available, or poor value, especially for less well-off people. Or suitable products there but not getting through to those who need them.

Our report shows it looks like more the latter. There are good products. They just aren’t getting through.  16 million people make fixing this a business opportunity for insurers, not a corporate social responsibility task.

Ten years ago, we struggled getting lower paid employees into pension schemes, and flood insurance for people in flood affected areas. Huge strides have been made with both.  Sustainable solutions seem to be the key – solutions not reliant on taxpayer subsidy or expecting businesses to act like charities. And working with human nature, not against it. 

If the game can be changed for pensions and flood cover, why not household insurance?”

Laurie Edmans, Financial Inclusion Commission

For many of us insurance remains that annoying tick at the end of a long ‘to do’ list. For others it could be the difference between keeping afloat or sinking further into debt.

It’s about recognising insurance isn’t simply a choice people make. Ask Claire.


Victoria Knowles                    victoria.knowles@aviva.com