HM Treasury and the Financial Conduct Authority (FCA) have been proactive in championing innovation to solve a key concern in the household insurance market. The two bodies held a workshop in June, focusing on the estimated 60–80% of low-income renters missing out on contents insurance and how insurtech could help.
Statistics from the Association of British Insurers, which have been analysed in GlobalData’s upcoming Household Insurance 2019: Market Dynamics and Opportunities report, show that the uptake of contents-only insurance fell by 5.6% in 2018. This suggests that underinsurance is becoming a major problem among this demographic, particularly as the percentage of renters is not declining.
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The ‘Access to Contents Insurance Innovation Workshop’ looked outside the box to solve this and invited a selection of influential insurtech players to pitch ideas, two of which were selected as winners.
Start-ups included Urban Jungle, Homelyfe, Slice, so-sure, and Bought by Many, which have all excelled in launching digital and tailored policies that could help this segment. Simplesure was judged to have pitched the idea with the biggest credible impact, and was heralded for offering no-questions-asked policies targeted at local communities. Retro came up with the most innovative approach by offering loss-specific loans to gig economy workers.
Trade bodies looking beyond the incumbent insurers is a positive step, as startups have proved they are capable of covering, and are often more willing to cover, niche and potentially risky areas. This has been evident in health insurance, where peer-to-peer providers, such as Bought by Many, have been vital in grouping together sufferers of particular illnesses to offer policies that the main insurers tend to avoid. The gig economy is another niche where startups such as Zego and Dinghy have stepped up to fill the void. Meanwhile, FloodFlash is an example of a start-up willing to offer specialist home insurance for homes at a high risk of flooding.
Such innovative companies have proved effective in covering the gaps left by mainstream insurers, so the FCA and HM Treasury should be praised for identifying another important area for them to target.
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