Insurance with Rent Schemes: An Empirical Study of Market Provision and Consumer Demand

John Hood, William Stein () and Claire McCann
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John Hood: Glasgow Caledonian University, The Britannia Building, City Campus, Cowcaddens Road, Glasgow G4 0BA, U.K.
William Stein: Glasgow Caledonian University, The Britannia Building, City Campus, Cowcaddens Road, Glasgow G4 0BA, U.K.
Claire McCann: Glasgow Caledonian University, The Britannia Building, City Campus, Cowcaddens Road, Glasgow G4 0BA, U.K.

The Geneva Papers on Risk and Insurance - Issues and Practice, 2005, vol. 30, issue 2, 223-243

Abstract: In the U.K., home contents insurance is widely available, with a reduction in the number of “traditional” insurance companies offering cover being offset by a growth in the availability through “non-traditional” providers such as supermarkets, motoring organizations and even energy providers. Research suggests that while around 80 per cent of all households are covered by home contents insurance, only around 50 per cent of people living in rented or local authority housing insure their contents. The low uptake is undesirable for two reasons. Firstly, financial exclusion is a phenomenon whereby individuals or sectors of society are deliberately, or effectively, denied access to financial services products, including home insurance, and it is commonly government policy to reduce such exclusion. Secondly, possession of contents insurance by householders minimizes the possibility that after a catastrophic loss such as flooding, uninsured persons will seek emergency assistance and temporary housing at the expense of their local authority. Studies and government reports exist that shed light upon the reasons behind the low purchase of conventionally marketed insurance. Special schemes exist to encourage purchase of insurance by enabling home contents insurance for local authority tenants to be paid for along with rent. Governments support such schemes. There appears to be little published research to indicate the extent to which such schemes are used by tenants. We survey local authorities in Scotland to determine the availability of “insurance with rent” schemes and their take-up rate by tenants. We find that many schemes exist, providing average market cover at typically average or lower cost and that there is no evidence of highly selective underwriting and pricing. Despite this easy availability of competitively priced, good policy cover, we find that the take-up rates by tenants are low. We consider reasons why apparently effective insurance products are not more popular. We conclude that local authorities and government need to promote the schemes with greater vigour. The Geneva Papers (2005) 30, 223–243. doi:10.1057/palgrave.gpp.2510030

Date: 2005
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