Cameron Roberts, Editor, COVER, discusses how the protection and health industry must change its approach to address the rising financial burden of renting in the UK.
I feel like when we talk about the protection conversation, we still cling to the three key life events that spark a need for cover: marriage, mortgage and childbirth.
Whilst these three events still serve as key drivers for getting customers interested in protecting their financial lives, the reality of modern-day Britain is that people are getting to these stages later in life than in previous generations.
This has created a gap in the market… renters.
Despite not owning property, renters still face the financial burden of paying monthly fees on time and are just as susceptible to accidents, injuries and illnesses that could mean they cannot pay to keep a roof over their heads.
So, what is the industry doing to address the needs of this underserved customer base?
To find out, I spoke with the teams at LifeSearch and National Friendly to discuss what the protection conversation looks like for renters and what products are available in the market.
What's the need?
On the face of it, renters have a similar reason for taking out protection as somebody with a mortgage: to pay consistent costs associated with everyday life.
However, due to the shorter-term pressures of renting and the fact that a rented property is not an asset under a client's name, many renters may not have protection at front of mind – even fewer will have had the conversation with an adviser.
Renters have typically been drawn to addressing short-term financial needs with "few bells and whistles", according to Justin Harper, Chief Marketing Officer, LifeSearch. The desire is to cover rent payments as opposed to responding to mortgage or house-price increases through a somewhat traditional income protection product.
Harper says, "What is particularly relevant to renters is, is there this shorter-term, immediate need to cover income loss?”
"It's so pertinent in the renter space; renters have got a big chunk of their outgoings committed to paying rent. If a renter were to fall ill, then they typically have very little to fall back on in terms of savings or other provisions."
Unfortunately for the renting population, the lack of a financial safety net could have serious consequences. Scottish Widows published a report which showed 35% of private renters would run out of savings within ten weeks if they were unable to work due to injury or illness.
Graham Singleton, CEO, National Friendly, says: "If that unexpected happens, they [renters] can suddenly start getting into some pretty nasty territory, particularly if they haven't got an employment scenario which includes sick pay or something like that.”
"So, it's a serious, genuine stress, which we see as a huge opportunity for friendly shield."
Research by LifeSearch indicated that 47% of renters worried about their ability to pay the rent and bills, and 35% did not know how long they would be paid by their employer should they fall ill or have an accident and be unable to work.
Accessing the market
The key question that crops up when talking about protecting renters is how to access the customer base. It's not so simple as mortgages, in which clients will often contact advisers.
Getting renters protected requires financial education, and the industry raises awareness of how those in the rental market can benefit from cover.
Harper says, "I think the question is: how do we make income protection or protection part of everyday conversation and real for people?”
"It's bringing it to life and making it relevant, less of a thing I must have, but something that has real benefits. Can it help boost my credit rating? Can it make me a better renter? Or a better, more credible person and more financially resilient?"
The Financial Conduct Authority (FCA) stated in its Financial Lives 2024 report that 24% of the UK population had low financial resiliency and could not withstand financial events impacting their abilities to pay for everyday life.
So, there's clearly a need for more protection to come into force, but what is the route to market?
One solution would be to engage with letting agents, who can raise the idea of protection products, such as income protection, with renters to introduce a financial safety net.
The rub here, according to Harper, is the "trust element", as letting agents are often seen as the "de facto agent for the landlord" and therefore may not be best placed to engage renters in the protection conversation.
Harper continues: "Letting agents is one route, but I think the rise of services for renters is another one.”
"We need to look at how protection can be embedded into that transaction or that service, the likes of your Canopies, for example, who offer a range of services directly for renters as well as landlords."
Another question raised by Singleton is whether advice had a place in the renter conversation. Due to shorter-term products often being simpler and more affordable, the cost of advice may not represent the best value for a client.
He added: "My view is, and this is a wider debate, if you're going for highly affordable products, there isn't a place in that for the cost of advice.”
"What's key there is that you're not betting your life savings on whatever it is that's being sold."
The crucial element here is to provide a tangible incentive for renters to have an interest in coverage, according to Paula Bertram-Lax, COO, LifeSearch. She raises the idea of protection increasing credit scores and making it easier for people to rent properties.
She says, "We want to look at how we can work with things like credit reference agencies.”
"If someone has got income protection, whether that's on a short-term or a long-term basis, it gives security to a potential landlord; that should push a potential tenant up the chain of possible renters."
Products in the market
The trio I spoke to all pointed to firms in the market that serve renters with products, including National Friendly and L&G; however, they all said that there needed to be more bespoke products available to appeal to the market.
From a design point of view, National Friendly described its Friendly Shield product as being "important to brokers with renter clients" when it launched in July 2024.
Speaking to Singleton, he pointed to affordability, quick decision times and short deferred periods as the key considerations made when building the product to appeal to renters.
From an intent point of view, however, Singleton points out that the need for renters and mortgage payers is ultimately the same. He says, "Both have got an obligation to make either a mortgage payment or a rental payment. What happens next is agnostic to whether it's for the mortgage or the rent.”
"If you don't pay your mortgage, you'll probably get a little bit of relief from your mortgage company, but once you've gone past three payments, you're probably getting into murky territory. On the renters' side there is probably less tolerance, but it's a similar outcome."
National Friendly reported an 81% increase in income protection sales across 2024 with the launch of Friendly Shield; however, it is not so easy to demonstrate the need for renter products to insurers, according to Bertram-Lax. This is due to the fact that "90%" of enquiries that LifeSearch receives are about mortgages or house moves, as opposed to renters being actively engaged.
She says, "It's hard to influence insurers to start looking at specific products and why they should invest in it if we can't give them a consumer demand.”
"That's not because I don't think the demand is there; it's just we're not in that education space strongly enough to awaken people to the fact that income protection is a great product when you rent."
The risk, according to Singleton, is that with such a large portion of the UK population privately renting – up to 19% of households, according to the Office for National Statistics – the financial risk is ever-growing.
He says, "What I find worrying, just looking at it from a societal point of view, is the feeling that there's a pressure cooker building of just that number of people for whom they've got the money they need to get by as long as something doesn't happen.”
"That feels like that's growing all the time, but the role of insurance to cover that something does happen isn't the norm."
Singleton concluded by calling for more insurers to look into the space and help grow the market; he says, "We don't have any uniqueness in terms of the right of access to that group. Ultimately, it comes back to affordability."
It will require the industry to pull together to address the financial safety of the renting population. Insurers should look into the market to develop new products; advisers must actively engage with the customer base, whilst associations and larger firms should campaign to raise the level of financial education and make protection a tangible benefit for those renting.
