SPECIAL FEATURE: Help to Buy and insurance
The government’s Help to Buy scheme has done more than just offer first time buyers a helping hand onto the property ladder – it has brought new opportunities into the insurance market.
Recent Office of National Statistics (ONS) figures illustrate how successful the scheme has been. Of the 7,313 homes sold using Help to Buy, 5,850 have been purchased by first-time buyers – a remarkable 80 per cent of the market.
This surge of first-time buyers entering the market has inevitably affected the ways that both insurance providers and brokers offer insurance. Following the example of high street banks such as Lloyds which offers Help to Buy-specific mortgages, new insurance offerings have been created which target this growing market. These products often promise cheaper or more flexible premiums in an attempt to help younger buyers to manage their money more effectively.
With these products set to have a significant impact on the insurance market, the way that insurance is viewed as a product is set to change. Historically viewed as something designed for the older generation, younger people often opt to fall in line with the ‘it won’t happen to me’ mindset.
Although, thanks in part to Help to Buy, a recent survey commissioned by Paymentshield illustrates the extent to which this attitude is changing. When it comes to the purchasing of buildings or contents insurance, it appears that the younger generation is now far more appreciative of the benefits of insurance than in previous years.
Having commissioned a survey for each of the last four years, we have seen a marked increase in the number of 25-34 year olds that hold buildings or contents insurance. Most notable was the rise during the past year, which coincided with the introduction of Help to Buy. Of those polled, 48 per cent said they currently had contents insurance in comparison to just 40 per cent last year. Similarly, buildings insurance also saw a three per cent increase.
However, despite this appearing to suggest that Help to Buy is making insurance more accessible to the younger generation, there is still some way to go. Generally, insurance products remain more highly valued by the older generation (the 2014 survey showed that 86 per cent of those in the 55+ category had some form of contents insurance – almost 40 per cent more than the generation who benefit most from Help to Buy).
So how can brokers best capitalise on this growing market? Brokers’ first priority needs to be highlighting the risk of damage or theft. Offering new and bespoke products to first-time buyers is the best way to do this.
In offering such solutions, brokers also need to acknowledge that first time buyers should be treated differently to experienced home movers. Emphasis should be placed on providing the most flexible and bespoke products and advice, in order to make the individual feel secure that their policy covers their individual needs. Some products, such as the home insurance offered by Paymentshield, can even provide benefits such as a two year introductory no claims discount, handing customers a little extra cash at a time when there is a big expense associated with the purchase of their first home.
The booming younger market also offers brokers the opportunity to advise on other forms of insurance beside home products. It is important to make your customer understand what their need for protection might be – for example exploring how long they could afford to continue to cover their mortgage and other outgoings if they lost their income. Would they be prepared to risk losing all the things they have worked so hard for by not having adequate protection against the risk of accident, sickness or unemployment?
Help to Buy has altered the way insurance is offered, and with the scheme set to run until 2016 in England, it seems certain that first-time buyers will continue to dominate the market. With certain growth in the younger market expected, brokers must continue to extend their offerings to capitalise on opportunities.