Access to insurance is important
Access to insurance is access to security and consequently should be available to as many people as possible At the moment however, insurance is not inclusive. This means that the challenge for the insurance industry is to make insurance more widely available.
How does insurance equal security? Well, having insurance in place should shield you from financial worry. A quick search on-line gives this response to ‘what is insurance?’ “Insurance is a means of protection from financial loss”
The key word here is ‘protection’ and I have recently seen the huge benefit this delivers. My son had a flood at home and happily had a good insurance policy in place. Through his Insurer, my son has access to a 24/7 claims line and he took advantage of the emergency call out service. As a result, the problem was identified and rectified quickly and efficiently with no additional cost.
This was a good news story for insurance. Unfortunately, because access to insurance is not currently universal, there are many more unhappy stories. A lot of people are without valuable protection for a multitude of reasons such as affordability, social circumstances and health. In addition we need to create more awareness around the flexible insurance solutions and advice already available. These are all challenging issues for the industry and we need to find solutions. Our focus must be to increase access and deliver the protection of insurance to many more people.
What are we doing to improve access to insurance?
The Financial Conduct Authority (FCA) highlighted the issue of restricted access to insurance as long ago as 2016. They issued an Occasional Paper, ‘Access to Financial Services in the UK’ to raise awareness to the problems. This document analysed the experience of vulnerable consumers in financial markets. The opening quote from Christopher Woolard, The Director of Strategy and Competition for the FCA at the time, sums up the challenge: “Financial inclusion is a vast topic and one where the actions of the regulator alone cannot possibly address all the potential issues.”
Fast forward to 2018 and the article FCA challenges industry to improve access to insurance. In this article the Regulator shines the spotlight on Travel Insurance. It highlights the difficulties encountered by disabled consumers and those with chronic health conditions. It also shows that access to insurance remains a huge challenge.
The challenge to improve the situation has been taken up by the Department of Work and Pension (DWP). They have recognised the problems faced by people with disability and launched a new initiative, the Access to Insurance Working Group. Led by the disability champion for the insurance sector, Johnny Timpson, the four key aims of the group are:
- Develop a signposting system for consumers, supported by charities and consumer groups
- Improve underwriting transparency and practices around chronic health conditions and disabilities
- Improve standards and create framework for those who distribute protection products
- Develop a proposal for greater accessibility to insurance through the workplace.
Timpson recognises the importance of this initiative. “This degree of collaboration is a first for the insurance sector and will enable us to make a real difference to the one in five people in the UK living with a disability or health condition, many of whom will have financial commitments, liabilities and protection needs.”
The ‘Access to insurance’ initiative is a huge first step but the Insurance Industry must now take up the challenge. Johnny Timpson and his group are setting a great example, with proof that collaboration is the key to success. Using this example, the industry needs to work together to become more inclusive and consequently, this will mean change. To truly increase access to insurance for more people across all insurance products, we will have to do things differently. But where do we start?
Undoubtedly, change and innovation in these three key areas could drive significant improvement to wider access for insurance:
In the latest release of the analysis of household income from the Office of National Statistics (ONS), over 3 million households have an income of less than £28,000 a year and 1.7 million of those exist on £20,000 or less. These statistics certainly underline the need for low cost insurance solutions.
Delivering low cost insurance solutions cannot be about simply reducing profit margins and reducing prices. Traditional products are probably outside the budget of these households however much they are discounted. As a result, Insurers need to think differently. Uber is a great example. The company recognised that most of their drivers did not meet the profile for many traditional insurance products. Most did not have access to savings, many are cash flow sensitive and a significant number are not native speakers in the country where they live and work. With the approach that ‘no thinking is out of bounds’, Uber rose to the challenge of designing ‘accident and social protection’ cover that makes a complex product accessible and straightforward to understand. The result? Partner Protection insurance with Axa. This insurance product puts protection in place for all eligible independent partners automatically, at no cost.
This is just one example of innovative thinking that can help widen the number of people who can benefit from the security of insurance. Other examples could include limiting the amount of cover to reduce the cost; low-cost distribution methods that use efficient low-touch processes and ‘pay-when-you-need-it’ cover.
Climate change, population dynamics and changing work patterns are just three examples of how the insurance landscape is altering. As a result, insurance products have to evolve to meet the new needs of the current generation.
Looking at changing population dynamics in more detail, the increasing problem of ill health is highlighted in research from the Newcastle University Institute of Ageing. One worrying statistic from this study is that the number of older people with four or more chronic diseases is expected to nearly double by 2035.
As people live longer and reach older ages the issue of failing health will increase. However, although we are living longer and are therefore more prone to ill health, medical science is making huge steps forward. Looking at A review of recent trends in mortality in England, the statistics show mortality rates for cancer, circulatory and respiratory diseases have generally been decreasing since 2001 across the UK.
The challenge for the insurance industry is to ensure that underwriting rules reflect this changing landscape. For example, maximum age rules and risk pricing need to reflect the fact that customers are living longer. In addition, although failing health will always be an underwriting factor, this must be balanced by improved medical treatments. ‘Jobs for life’ are no longer common in the work environment, rather we see the ‘gig economy’ growing. Additionally, according to the ONS, the number of self-employed increased from 3.3 million people (12.0% of the labour force) in 2001 to 4.8 million (15.1% of the labour force) in 2017. Risk parameters from the last decade are no longer relevant and must evolve to protect the needs of the customers of today.
Finally, we need to help people recognise the real benefits of insurance. It is not enough to have innovative and fairly priced products that reflect the needs of all customers, we also need to make sure the right people buy them. Some of the most vulnerable people in our society don’t ever consider insurance. This is for multiple reasons, such as many people believe insurance is too expensive. Others may believe their health or social circumstances mean they cannot get insurance.
Our challenge is making sure people know that the solutions are available for them. Above all, we also need to help consumers really understand the value of having the right protection in place. Universally we need to help point consumers in the right direction for products that will suit their own particular circumstances.
The Access to Insurance initiative focuses on helping people with health and disability issues find the right insurance. The group aims to ensure these customers are directed to the right place for insurance help and advice at the outset. We need to build on this and include all vulnerable sectors of society across all relevant insurance products.
We already have a portfolio of flexible insurance solutions to meet varying budgets. With innovation the number of appropriate insurance solutions will increase. We just need to make sure EVERYONE knows about them.