A lack of education on financial products and confusing terminology around home insurance is leading many UK consumers to be underinsured, with one in five Brits admitting to having no buildings or contents insurance.
The average UK household has £25,857 worth of contents, but many consumers are leaving themselves exposed: a worrying 51% of those with buildings coverage wrongly believe their contents will also be covered by the policy, new research from Together Mutual has revealed.
While buildings insurance is “almost compulsory” when taking out a mortgage, the language around the policies could be confusing homeowners, Jon Craven, CEO of Together Mutual Insurance, told Insurance Business.
“It’s referred to as home insurance… and people just assume that if they buy home insurance, it covers not just the building but everything in the home,” Craven said, adding that the terminology used can be “misleading” for consumers.
But while it’s down to insurance companies to make sure that policyholders understand what products they are buying, the problem stems from a deeper lack of education on financial matters, according to Craven.
“Clearly there’s a responsibility that people are quite clear on what they’re purchasing, but I think it’s broader than that. I don’t think people are as informed as they should be about financial services and financial products generally, so it’s probably a sign of wider malaise within the country,” he said.
For some, there is a degree of wilful ignorance too: “I often use the analogy that people would rather go to the dentist than think about their insurance,” Craven commented.
Pricing and external pressures also have a part to play, according to the CEO.
“It’s also to do with affordability,” he said, pointing to a “tricky few years since the financial crash” and factors such as public sector pay freezes.
“Obviously we’ve had Insurance Premium Tax increases too, which have been pushing up premiums above the rate of inflation probably and above the rate of wage earnings, so there’s an affordability issue there.”
Many Brits also simply underestimate the value of the contents they have in their home, and think they could easily replace them, Craven said.
Almost one in five of those who don’t have home insurance said they have never even considered getting contents insurance, while 9% believe their area is safe enough not to need any protection, the report found.
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