“Our partnership with ECH is a salutary reminder that the insurance industry still has the imagination, energy and focus to be a force for social good, and we are thrilled to be playing our part in protecting those that need our help most.” Gordon Dewar, CEO, Salvation Army General Insurance Corporation (SAGIC).
A home insurance policy has been launched to remove the ‘premium poverty’, which puts the cost of insurance beyond the reach of some of the nation.
The policy (SAGIC Core Home), which was developed by specialist broker ECH Facilities Ltd and is underwritten by SAGIC (Salvation Army General Insurance Corporation Ltd), provides £30K of contents cover and £10K alternative accommodation cover for just £4 per month.
Neil Bresler, the veteran broker who designed the policy, says it will enable people with less disposable income to afford to protect some of their contents for the first time, and help close the premium poverty gap.
He explained: “The sad truth is that those who need insurance the most are the least likely to be able to obtain it, either because they can’t afford the premium, or because they live in postcodes deemed high risk by traditional insurers, or because they’re subject to punitive exclusions. These conditions have locked millions of people out of protection, and our industry has done little to move the needle, until now.”
Neil explained that SAGIC Core Home provides stripped down cover for home contents. “We’ve removed high risk elements like jewellery, valuables and accidental damage as well as fringe benefits, which are the prime factors behind the high cost of cover, but made sure customers are protected against major perils such as fire or burst pipes. This enables us to reduce the premium to £4 each month, which is less than 15 pence per day.”
“A policyholder can stop paying at any time at no charge and our terms are 100% transparent. The Government takes 43p per policy in insurance premium tax (IPT), we receive £3.00 in the first month, and then £1 per month thereafter.
“This product is positioned for those that require essential cover only; we don’t cover students (they are served by other specialist insurers), and we don’t have the ability to cover for flood risk in all post codes. We estimate that of 22.6 m households in the UK, 26% or six million have no home contents insurance, and they are the market we are seeking to help.”
Neil said that, according to a recent report around 14 million people are in poverty in the UK, including 4.6 million children and 1.3 million adults of pensionable age. In April 2021, there were 6 million people receiving Universal Credit, a 98% increase since March 2020.
The same report cited research from Bristol University (ii) which found that, on average, low-income households across the UK pay an additional £490 per year for essential services, such as insurance. And the Bristol research found that people who live in a high-risk area paid nearly £300 per year more on average, if they had insurance, than those who lived in a lower-risk area.
Neil said: “There have been some industry voices such as BIBA (British Insurance Brokers’ Association), calling for more help for vulnerable groups, but in the main, our industry has closed itself off from tackling this issue. At ECH we are finally starting a long journey to redress the balance.”
“What we really need now are distribution partners, and we’re talking to affiliates such as social housing agencies, sheltered accommodation providers, debt management agencies and others to secure distribution.”
“In order to make this product work, we need partners who can get the product to those six million people that need our help.”
Commenting on Core Home, Gordon Dewar, SAGIC’s chief executive said: “When Neil and his team approached SAGIC we were pleased to be able to provide the underwriting support, as this initiative closely fits our values. It is a tragedy that, thanks to the operation of the market, certain demographics often pay more for their insurance than others.”
He added: “Insurance has noble roots, underpinned by the principle that the many protect the few, but increasing personalisation and changes to risk profiling have threatened this principle.”
“Moreover, while most insurers began life as mutuals with strong links to the communities they served, the march of progress has changed the industry out of all recognition.”
“Our partnership with ECH is a salutary reminder that the insurance industry still has the imagination, energy and focus to be a force for social good, and we are thrilled to be playing our part in protecting those that need our help most.”