By Chris Campbell.
10 January 2021 (2 months ago)
Purchase of protection policies in the UK have always been closely related with people buying homes or remortgaging, thanks to mortgage advisers analysing and reviewing their protection needs. When it comes to renters, however, few have protection in place. To better comprehend their needs and how the insurance industry can aid them more effectively, a survey of 1000 renters across the UK was conducted.
RENTERS’ NEEDS AND CONCERNS
To evaluate the concerns of renters, they have been asked how likely a range of events were to happen to them. One fifth of renters mentioned they were likely to be unable to work due to illness. In contrast, only 10% of renters cite that theft of their contents was likely and yet contents insurance is the most widely purchased insurance cover among renters. This implied the need to inform renters of the financial implications of being unable to work and the available products to address this risk.
To understand what mitigations renters had in place, we queried how they would cover the cost of accommodation if they were too ill to work. One third said that they would use savings to cover rent. Other responses included relying on state benefits or moving to cheaper accommodation. Furthermore, nearly half of respondents had less than £2,000 in savings. Considering the average UK rent is approximately £940 per calendar month, the aforementioned savings would only provide cover for around 2 months, thus relying on savings is not a pragmatic solution for many.
To understand how under-served renters currently are in the UK, an analysis was carried out to calculate the ‘annual rental protection gap’. This is the difference between the total rent paid in the UK every year and the amount of protection already in place, allowing for the fact that not all renters can afford protection. The result is a shocking gap of £30 billion. If all those renters had protection in place, it would translate into an estimated £400 million in additional annual premium income. This represents a noteworthy opportunity to serve the needs of renters while improve the growth of the protection market.
WHAT SHOULD INSURERS DO?
The analysis showed that the price of income protection policies is not a significant barrier. Instead, product design, marketing and distribution should be considered in depth.
Looking at product design, insurers should note that renters are more likely to move more often than homeowners and thus need greater flexibility in cover. For instance, they may relocate or extend their tenancy agreement. It would be helpful if they could port or change their protection in these circumstances without undergoing another underwriting process again. Besides that, since renters are concerned about a whole range of various risks, it is crucial that insurers can offer products that combine or promote the take-up of multiple covers.
Lastly, the industry also needs to focus on distribution. The research showed that most renters did not have a conversation about their protection needs at any point during the renting process, but more than 80% of them said they would have found it beneficial. Another question is when would be a good time to have that conversation in the letting process? Based on the research, 40% of renters want to be informed about the products available to them before they sign the lease while 26% said the best time was when they started to look at properties.