Financial stress projected to drive an increasing number of policyholders into non-standard classification

Prestige Underwriting projects the increase in the level of financial stress among UK consumers to continue up to 2030, exacerbating the number of individuals who could potentially be classified within the non-standard customer segment.  

The number of individuals expected to enter the non-standard customer segment will likely increase in light of the poor outlook for household incomes.  Housing costs and prices for essential goods are projected to continue rising significantly above wages, causing an increase in poverty rates for working-age adults.

In addition to leading to an increase in non-standard customers, the pressure of financial stress on renters and homeowners could contribute to an increase in under-insurance in the UK home insurance market as the budget strings of policyholders are put under further distress.

With this high level of financial stress, tens of thousands of renters and home owners are expected to reduce their home insurance cover over the next five years in a desperate bid to cut costs. Tenants in the private rental sector are likely to economise on contents’ insurance by opting for no insurance, while property owners are more likely to economise by under-insuring or increasing their excess payments.

Alison Williams (pictured), Managing Director at Prestige Underwriting said: 

"Non-standard customers as a segment include people with motoring and non-motoring convictions and people in financial stress.   The intensification of heightened consumer financial stress is very concerning for the insurance sector and wider economy.  

“All insurance providers need to be attuned to the evolving needs of their clients and we must all find solutions that cater to this changing financial landscape while maintaining the integrity of coverage.  At Prestige Underwriting we are pleased to be able to cater for a wide range of non-standard risk profiles meaning that this customer segment can still find a suitable insurance product to suit their needs.  

“Specific to the knock-on effect this can have on underinsurance, this in itself is an additional concern.  While we understand the key drivers of it, under-insuring is a false economy, potentially leading to costly consequences in the event of a claim.”

Despite recent signs of wider economic improvement, the increasing trend in under-insurance is already established. Recent premium financing data showed a 9% rise last year in homeowners opting to cancel their insurance policies, and charity Citizens Advice reported a doubling in the amount of people seeking help following a CCJ due to utility debt in 2023.

The worsening trend is indicated by the expected rises in bankruptcies, insolvencies and County Court Judgments (CCJs), which are predicted to exceed levels observed in the aftermath of the 2009 financial crisis.  The report compiled by Finaccord for Prestige Underwriting forecasts 165,000 insolvencies for 2030, exceeding the level seen in 2009. Additionally, it anticipates that an extra 1.1 million renters and homeowners will receive County Court Judgments (CCJs), bringing the cumulative total of people with CCJs to 6.7 million by 2030.

Authored by Prestige Underwriting