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Will the future of insurance be an inclusive one?

David Heath, Chair of the IFoA’s Public Affairs and Policy Board, blogs about the IFoA’s new Inclusive Insurance bulletin series.

David Heath, Chair of the IFoA’s Public Affairs and Policy BoardMost households in the UK have some kind of insurance to protect themselves against risks such as a car accident, house burglary, or a family pet falling ill. The protection afforded from insurance gives people the peace of mind to plan beyond day-to-day expenditure, protects against financial hardship, and helps build financial resilience in an uncertain world.[i] Insurance also provides protection to businesses, playing an important role in economic development and company resilience.

The risks that society faces, and will face in the future, are changing rapidly, not least through the evolving COVID-19 crisis. It is essential that the insurance sector continues to evolve in such a way as to meet these changing needs so that all individuals and businesses are able to access the protection of insurance, allowing them to take control of their lives and livelihoods and reduce their vulnerability against risk. The response of the insurance sector to this changing landscape provides both challenges and opportunities, and we are already seeing governments, regulators and the industry adapting to evolving and emerging risks.

In considering these responses, we should ask whether they promote ‘fairness’ and ensure that sufficient protections are in place. IFoA’s Inclusive Insurance bulletin series, which launched today, will explore these issues and will consider whether the insurance industry is providing products that remain fit for purpose, or whether they penalise or exclude those most in need of protection. Through the series we will present a broad range of perspectives on the issues, and have invited contributions from a range of important voices in the debate.

Drivers of change, the first bulletin in the series, explores the societal, technological and macroeconomic drivers that are creating the need for change, and the impact they are having. It includes contributions from Citizens Advice, the Social Market Foundation and several members of the actuarial profession.

Hannah Poll, Policy Researcher at Citizens Advice, discusses the extent of the loyalty penalty in the UK. Citizens Advice research found that loyal home insurance consumers are paying a £750m loyalty penalty every year when renewing their policies. Most people don’t realise they’re paying a loyalty penalty, even when their premiums increase. In the article, Hannah states, “to navigate the insurance market successfully, consumers need to be able to access, understand and compare the quotes they’re presented with and comprehend what it means for them. This requires a combination of literacy, digital skills, financial capability and market knowledge. Anyone who is lacking in any of these will be at an inherent disadvantage when it comes to getting the best deal. This especially impacts vulnerable and low-income consumers.”

Scott Corfe, Research Director at the Social Market Foundation (SMF), explores Insurance Premium Tax (IPT) which is applied to most forms of general insurance, including cover that is effectively compulsory, including motor and home buildings insurance. SMF has shown that IPT has a greater proportionate impact on lower income households. The lowest income 10% of households, in terms of post-tax income, spent 4.1% of their disposable income directly on insurance, compared with 1.6% for the highest income 10% of households. This raises the question of insurance exclusion, where households (and businesses) with competing and pressing financial demands may forego or reduce their insurance cover if they have the choice, or reduce their disposable income further where insurance is compulsory.

The rise of the gig economy, the present economic outlook, changing demographics within society, advances in wearable technology, increased accessibility of genetic testing, and climate change are other drivers of change explored within the current bulletin. The second and third bulletins will be released later this year. They will explore the response from the industry, including interventions that have been implemented or proposed, and the role insurance plays in empowering individuals through the protection it provides.

If you want to contribute your own perspective to the IFoA’s Inclusive Insurance Bulletins, contact


[i] Financial Inclusion Commission, ‘Improving access to household insurance’ (November 2017)