I was honoured to be asked to take part in the Financial Inclusion Commission Summit on Monday, July 18, 2022. It is clear that times are exceptionally hard for very many people at present and at BIBA we want to do all we can to help people affected financially.
BIBA’s 2022 Manifesto includes a number of calls that are mindful of expanding financial inclusion and we are keen to work with all stakeholders to find a path to help people become protected against financial shocks that could worsen their situation through easier access to suitable insurance.
In summary, at the summit I was able to explain that we are helping with the issue where people that are receiving universal credit are seeking to rent a property. There are barriers to them renting from landlords who cite insurance as the reason. This is why we are working with the charity Shelter, to help explain that it is a complete myth that landlords’ buildings and contents insurance contains a “NO DSS” clause. We have 100s of members who can offer policies with NO such clause.
Insurance should NOT be considered a barrier to tenants on universal credit having a roof over their heads.
We know too that contents insurance is low on the priority list of essential spending for many on low incomes living in social housing. Although the cost of insurance, especially if associated with rent, can be very low, uptake is still minimal. We are seeking buy-in from the Registered Social Landlords, Government, the insurance sector and the FCA to work in partnership to offer insurance with rent schemes and gain maximum penetration wherever possible - so increasing the financial inclusion of those who most need the resilience offered by insurance.
Young drivers who find motor insurance unaffordable and who may risk driving uninsured or not driving at all as a result is another area of focus.
Motor insurance is not a choice, it is a legal requirement.
Young and inexperienced drivers pay more than an experienced driver because statistically they pose a higher risk. But, with advances in technology now, many motorists can take more control of their premium by considering a telematics-based policy. By putting a small black box in their car or downloading a pay- as-you drive app on their phone, their premium can be calculated according to factors like their speed, cornering g-force, and mileage.
Significant discounts can be obtained by young drivers – sometimes as much as 25%. Plus, there are many important road safety benefits from using telematics with newly qualified, under 25 years old drivers using a telematics-based policy being three times less likely to have an accident.
Meanwhile, BIBA holds a quarterly Access to Insurance Committee chaired by former FCA consumer panel member, and BIBA non-exec director, Caroline Barr.
The Access Committee oversees our four insurance signposting agreements.
Signposting is a process whereby if a firm (broker/insurer/bank/other) cannot provide cover for a certain type of risk themselves they will try to signpost the customer to a firm that can help them, or to a suitable signposting service like BIBA’s Find Insurance Service which aims to match people and businesses seeking insurance to a suitable provider.
The four signposting agreements in which firms commit to signposting are:
That’s not all! We also work closely with the Ministry of Defence on the needs of service personnel and our Armed Forces Covenant Commitments. Our specialist members can help to ensure forces personnel and their families can access suitable cover for their unique risks and circumstances such as airside risks, overseas postings, war exclusions and their particular challenges in passing an affordability test.
We are also working with Government and the ABI to look to reduce the cost of insurance for leaseholders of property in high-rise cladded buildings. We welcome the Government’s recent announcement, providing an intervention to help speed up remediation work via a Government-backed PI scheme for EWS1 fire assessors.
Insurance customers pay a huge £6.3 billion to Treasury in the form of Insurance Premium Tax . For example, even those paying the highest comparative premiums - young drivers, people on benefits and leaseholders in cladded buildings, are paying 12% of all their premium to the Government. Those seeking travel insurance have to pay a higher rate of 20% of their premium due to a historic anomaly.
We firmly believe that insurance is a social good helping people avoid financial shock, so we are dismayed about the amount unfair taxation adds to the average family expenditure– car, home, pet, travel – it all mounts up.
We think now is the time for the Government to reduce the headline rate of IPT to 10% and we think that should also apply to travel insurance too. But there are some consumers, like tenants in cladded buildings, who genuinely should be zero-rated .
Financial inclusion is high on BIBA’s agenda, and we have members that can support even the most vulnerable of customers. You can watch the Financial Inclusion Commission Summit here: Financial Inclusion Commission Virtual Summit Part III - Insurance Roundtable - YouTube
