Report by Hyman Robertson reveals annual rental protection gap of £30bn
There is a potential market of eight in 10 renters without cover, a new report entitled ‘Protecting Generation Rent' has revealed.
The research, commissioned by Hymans Robertson, found that 18% of UK renters believe they have some form of income protection in place, leaving an annual protection gap of £30bn.
According to the report, there is an untapped market of income protection premiums worth up to £400m a year from UK renters.
The research found that a fifth of renters are concerned about not being able to pay the rent because of being ill and unable to work - the second highest concern after a landlord increasing rent to an unaffordable level (22%).
According to the report findings, renters said being exposed to an income shock was of greater concern than being made redundant (18%) and a landlord terminating a tenancy without warning (17%).
Cost was not revealed to be much of a barrier for respondents, with 38% saying that they were willing to spend up to £20 a month for a product that would pay out for 12 months, with a further 19% happy to increase that monthly spend to £30.
According to Hymans Robertson analysis, premiums could be as low as £14 a month for a 40-year-old non-smoker with a payment period of a year.
"The renting population is changing fast and the opportunities are there for the insurance market to evolve and reflect this," said Richard Purcell, technical and innovation lead at Hymans Robertson. "Our research shows that the UK's renting population can no longer be classed as ‘homeowners in waiting'. Renters are now more likely to be older with more chance of having families and responsibilities so it's not surprising that these are the renters most concerned about being unable to pay rent due to illness or inability to work.
"When asked to put themselves in this position, most respondents said they would use their savings to pay rent (33%) but how long can we realistically expect this to last? Our research shows that the cost of premiums won't necessarily be a barrier to most renters however more clearly needs to be done to help them understand their protection requirements and highlight the availability of these products."
Purcell said there are number of things insurers can do to appeal to renters. "With just a few small changes, many existing products can be adapted to be more flexible and best suit their needs," he said. "Offering flexibility in cover amount for example, making it easier to port or change protection in the event of rent changes or relocation would benefit many renters.
"They also have a much shorter planning time horizon than home owners so products should be adapted to suit that by providing shorter cover terms of two years or less."
One of the main challenges lies in informing, educating and distributing within this potential market, he added. "Where traditional distribution methods are not working, it will be exciting to see what new routes to market will be used," he said. "All in all, the changes required by insurers to seize this opportunity should be relatively easy to implement and could go a long way in making products more appealing and acceptable to rental consumers."
We will also be exploring this issue on our 'Protecting the rental market' panel at the COVER Protection & Health Summit on 10 October.
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