HM Treasury (HMT) recently issued a press release detailing a workshop it ran with the Financial Conduct Authority (FCA) on 20 June 2019. The purpose of the workshop was to find innovative approaches to improve access to contents insurance for low-income earners. The majority of low-income renters do not take out contents insurance, at least in part because there is a lack of suitable products in the market. This workshop is just one example of the work that both the government and regulators are doing to encourage an increase in financial inclusion.

The workshop focused on finding innovative solutions to increase insurance coverage rather than simply replicating existing products digitally. To do this, two competitions were organised. The judges decided that the idea with the "biggest credible impact" was a product which offered price-first, no questions asked contents insurance sold through touchpoints in the community (for example, the post office). The idea with the "most innovative approach" was a product which offered loss-specific loans to gig economy workers and sold contents insurance alongside those loans to protect against losses linked to future incidents. The judges were Gwyneth Nurse (HMT's Financial Services Director), Christopher Woolard (the FCA's Executive Director of Strategy and Competition), Caroline Wayman (the Financial Services Ombudsman's Chief Ombudsman) and Sophie Winwood (an associate at Anthemis, a fintech venture capital fund).

At the workshop, John Glen (the Economic Secretary to the Treasury) claimed that "the UK is leading the world when it comes to innovation in the insurance industry". It is certainly true that the FCA is taking steps to assist insurtech firms. Two firms in the latest cohort for the Regulatory Sandbox were insurtech firms, one providing a travel insurance product for consumers with cardiovascular disease and the other a home contents insurance product in conjunction with loans for low-income earners. The FCA's Regulatory Sandbox is intended to help unauthorised firms test their products and services and receive guidance on regulatory compliance before launching to the market.

Financial inclusion refers to consumers having access to affordable financial products and services that meet their needs. In March, HMT published its first annual financial inclusion report and the FCA has listed regulating for vulnerable and excluded consumers as one of its strategic themes in its Approach to Consumers document.  Given the focus placed by the government and regulators on expanding access to financial services, it is not surprising that both the workshop and the insurtech products in the latest Regulatory Sandbox cohort aim to increase financial inclusion. The private sector is also starting to act on financial inclusion by exploring opportunities to provide products to those who do not traditionally have access to financial services. It can only be a matter of time before the insurance sector starts offering innovative products to a greater number of currently excluded consumers.

With thanks to Michael Calladine for his help in writing this alert.

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