Columbia Threadneedle Foundation partners with Fair by Design to address barriers to financial inclusion
Columbia Threadneedle Foundation is pleased to confirm a grant of £60,000 to Fair By Design, run by the Barrow Cadbury Trust. Fair By Design is dedicated to ending the poverty premium. The grant will fund a research project looking at how the poorest in society can secure more and better access to affordable insurance, as well as challenging structures which create and sustain the poverty premium in insurance, including unfairness and a lack of inclusive design which means insurance will cost more the poorer you are.
A life/income shock is one of the main reasons people now fall into problem debt1 in the UK. These “shocks” are frequently the result of insurable risks, such as loss of income due to ill health, a fire, burglary. While we are increasingly encouraged to protect ourselves and our families from future risks and to look to the market for protection needs2, many people on low incomes do not have the financial resources to invest in securing their financial futures. There are three factors at play here:
- They struggle to afford appropriate insurance because they are deemed to be a higher risk
- They’re not able to access insurance that meets their needs due to policy exclusions or the expense of a comprehensive product
- They are being locked out of insurance altogether.
This problem is set to increase as the insurance market moves from a pooled risk approach to one of individualised risk, with risk transferring from insurers and government to individuals. Insurance is now the biggest contributor to the poverty premium. Car insurance is the biggest single contributor, with a “geographic penalty” of £300 per annum for people in deprived areas. Additional charges for paying monthly instead of annually can mean an extra £160 per year, making a poverty premium of nearly £500.3
This project will initially focus on car and household insurance and will include new research into the experience of people in the UK who are uninsurable as well as those priced out of the market or foregoing other essentials to pay for insurance. It will engage relevant stakeholders and industry experts and aim to find solutions matched to the political, regulatory and business landscape.
It will utilise funds from the Threadneedle UK Social Bond Fund, which contributes a share of its annual management fee to Columbia Threadneedle Foundation.
Alison Jefferis, Chair of Columbia Threadneedle Foundation said: We’re very pleased to be funding this important work, which will contribute to the Foundation’s aim of improving individual lives while also driving fundamental social change – in this case universal access to affordable financial services that support decent standards of living. This is our first major project funded by proceeds from the Threadneedle UK Social Bond Fund, reflecting the ethos of the fund as well as Columbia Threadneedle’s broader desire to have a positive social impact in the UK.”
Martin Coppack, Director of Fair By Design said: “We are all now encouraged to look to the market to protect ourselves and our families from the inevitable ups and downs of life. But what happens if you can’t move to a different postcode – one seen as less risky by insurers? What happens if you have had cancer or another illness in the past and are seen as a higher risk? We know that a life or income shock is one of the biggest reasons people get into debt, yet those who can least afford a shock to their finances are being priced out or left out.
“As companies become more able to individually price risk and move away from more mutual forms of pricing we are being left with a two-tier market – one that works for the healthiest and wealthiest in society. The poverty premium means that households often go without insurance, and they often have to resort to other more costly ways to protect themselves such as expensive credit.
“To level up our communities, regulators, policymakers and industry need to work together to make sure people on low incomes can access the protection they need at a price they can afford.”