United Kingdom

A valuable safety net

Rising food and energy prices coupled with the removal of the Universal Credit uplift are putting low-income households under significant financial pressure. Helen Povah, client director, managed programmes at Aon, explains how tenants home contents insurance can protect them from financial shocks.

Everyone’s feeling the financial squeeze as rising food prices, higher energy bills and tax increases push up the cost-of-living. But, for those on low incomes, this squeeze is likely to be felt much more intensely.

Alongside the cost-of-living increases, the removal of the temporary uplift to Universal Credit last October means that many low-income families saw £1,040 disappear from their annual income. Even before the uplift was removed, The Trussell Trust reported an 11% increase in demand for food parcels compared with pre-pandemic levels and warned that these numbers would only rise as financial pressures kept increasing1.

Risk of financial shocks

This is particularly concerning for low-income households, who are already at a greater risk of suffering a financial loss. According to the Association of British Insurers2:

  • Social-rented households are almost twice as likely to be burgled than owner-occupied households.
  • Arson rates are 30 times higher in lower-income communities than in affluent ones.
  • Low-income households are eight times more likely to be living in tidal floodplains than people in more affluent households.

As well as a higher risk of suffering a loss, recovering from any of these events can hit a low-income household hard. Without any disposable income to replace or repair belongings following a burglary, fire or flood, it can affect the household’s ability to buy food, pay bills or rent and make credit card repayments.

This can leave them facing a spiral of debt and unscrupulous lenders – neither of which are easy to escape.

Protecting low-income households

With low-income households facing additional pressures from the cost-of-living squeeze, it’s more important than ever to protect them from financial shocks. Offering them access to a tenants home contents insurance scheme is an effective way to do this.

Schemes can be provided through registered social landlords and they are designed to meet the needs of low-income households. Cover is flexible, with tenants selecting how much cover they need – from £4,000 to £40,000 – and whether they want to include accidental damage.

It’s affordable too, with premiums starting from as little as 48 pence a week. Another key feature of these schemes is that they also allow tenants to pay for their cover in instalments – usually weekly – without any interest charge. This allows those on limited incomes to budget more effectively than with an annual premium.

Most schemes have no excess to pay if a tenant needs to claim and because premiums are calculated by area rather than by individual property, everyone can access cover.

Benefits for landlords

As well as providing a valuable safety net to low-income households, offering a tenants contents insurance scheme delivers benefits to landlords too. By enabling tenants to replace stolen or damaged items through their insurance, there’s greater certainty over rental income.

Offering a tenants contents insurance scheme also shows commitment to financial and social inclusion for tenants. This type of scheme is recognised by the Financial Inclusion Commission as providing a vital safety net for those that may not have access to insurance.

Where they don’t have access to this type of scheme, tenants are very unlikely to consider taking out their own insurance. This means that, by offering a scheme, landlords are helping their tenants and demonstrating that they take their social responsibilities seriously.

In spite of these benefits, we’ve seen social landlords removing these insurance schemes over the last 12 months, sometimes leaving thousands of tenants without access to affordable cover. This is a retrograde step, especially given the current cost-of-living crisis, and may be driven by misunderstandings around how schemes are implemented or the resources required to offer a scheme.

Simple implementation

As a non-advised sale, offering a tenants contents insurance scheme is outside of the Financial Conduct Authority’s rules on providing financial advice. Similarly, as the scheme is for the benefit of tenants, it’s not necessary to put it through a procurement exercise.

Schemes can also be tailored to the landlord, coming with as much, or as little, support as they want. This can range from simply adding their name to the scheme, with Aon responsible for marketing it to tenants and dealing with any queries, through to a more proactive involvement where a landlord can earn commission on every policy taken out by tenants.

Demonstrating your commitment to financial and social inclusion is important, especially as the cost-of-living squeeze puts more pressure on low-income households. Offering a tenants contents insurance scheme is a good way to support your tenants and show this commitment.

More information

At Aon, we are passionate about financial inclusion and insurance and we work with around 80 registered social landlords in the UK to enable them to offer tenants home contents insurance to their tenants. To find out more about how we can help you support your tenants, speak to your Aon account manager or email Helen Povah at [email protected].

1 More than 5,100 food parcels given to people facing crisis across the UK every day in past six months, says the Trussell Trust - The Trussell Trust

2 Helping Tenants Protect Their Possessions, A Guide for Housing Officers, Association of British Insurers (December, 2010)