The home is where the heart is

New research from Go.Compare (cross referencing the Association of British Insurers ) found that 5.6 million homes don't have the right level of cover in the UKI, while 9.3 million households don't have any contents insurance, leaving them completely unprotected.

This is one subject that’s very close to my heart.

I remember sitting in my first home insurance focus group. An old man explaining how nice it was to have his insurer step in when he and his wife lost everything, and how this support gave them a life again. 

Then there’s my own experience of burglary where I had a watch stolen. It was the last gift my Dad ever gave me before leaving us. I knew it'd never be replaced, but at least my insurance meant the financial value was recovered. 

The worst times are those I’ve sat in call centers and listened in on those moments when the caller realises they aren’t covered for a specified personal possession or their policy doesn’t cover all of their losses. It’s heartbreaking. 

Our homes and the things we keep in them are the embodiment of our lives, family, and memories of both. To think some may not have contents insurance when they really should isn't a pleasant thought at all.

While this survey is a useful reminder of the risks of underinsurance or indeed no insurance, it also leaves us with an awful lot of questions. The primary being, is this an awareness and understanding issue or is this a lack of trust or belief in the value of home insurance? 

The likely answer is somewhere in between for some, and cause and effect for others.. 

Underinsurance is an interesting word. It ranges from no cover to a policy that’s in line with the average or expected level of cover. This in and of itself is hard enough to understand. A more human view of this might be, the amount of insurance we're happy to pay is related to the value we place on the things we posses. For most of us this is a minefield of complexity. What can be covered? By who? What are the risks? And, how likely are they to be stolen, and what price will I have to pay? No wonder I still use a Broker.

More simplistically, as a homeowner, you should know roughly the value of your building and its contents every year. If your estimates are too low, you could find yourself underinsured. 

However, the gap between what a person believes their possessions are worth and their actual value can be substantial. This is an excellent example of where Insurers  could and should play a better role in helping make sure insureds don’t get caught out. For example, rebuild valuation calculators and possession value calculators. Communicating guidance and ensuring plain English is used to explain what’s covered and what they might need to consider for additional cover, e.g. engagement rings.

The Financial Ombudsman reveals they often receive complaint like:

• The consumer thinks they insured their home or contents for the right amount, and their claim should be paid in full.
• The consumer accepts they were underinsured, but not to the extent the insurers say they were. So they think they should receive more for their claim.
• The consumer felt the information provided at the time of sale was unclear and misleading. So the consumer doesn’t think they should lose out. This complaint can be directed to an insurer and/or a broker, depending on how the policy was sold.

It’s here that we see the casual relationship between understanding and trust play out. The consumer undoubtably feels they’ve been unfairly treated, and their trust in the insurer plummets as a result. The insurer may well be in their right to withhold payment, but clearly there’s a disconnect somewhere. 

Customers are left asking: In a data-driven world surely insurers can help people understand their likely rebuild costs better than we can? Why can’t insurers tell people when their cover seems short? Why can’t the insurer make sure people are alerted when they need to increase their cover or consider additional expenses?

These are all very reasonable questions, and most can be answered with a “yes they could”. So why aren’t they?

The answer is simply, they’re not built to respond in this way. It requires their businesses to be built around the customer. To have real-time data on their changing lives. And to be alerted when significant changes take place that require re-evaluating the policy.

The cost of getting to new data sources, integrating these, and shaping events in the home insurance lifecycle needs insurers to have built their technology systems making all this happen.

The challenge is that most are policy-centric and are instead built on the idea of annually servicing us with a price and a reissued policy.

While this might seem conceptually trivial to most of us, it’s transformational to most insurers. They need to rebuild their foundations around customer focused systems, called customer cores. This will ensure customers can have polices, data services and experience sshaped around us and our lives.

From prompts based on events that show up in our bank balances through open banking (like large purchases) to time-based triggers.

The active, adaptive and customer centric insurer could play a much more significant role in making sure people don’t get caught out. It's too important not to.