Over half (55%) of people in poverty are finding it difficult to pay for their insurance amidst the cost-of-living crisis – leading some to give up insurance as they prioritise food and energy bills, new report warns today.

New research by the Social Market Foundation (SMF), supported by Fair By Design, found that insurance is becoming increasingly unaffordable for those on low incomes as they are charged “a poverty premium” – meaning they pay more for insurance cover due to reasons they cannot control, such as where they can afford to live.

People on low incomes can pay £300 more on car insurance than better-off drivers simply because of their postcode. People in poverty also pay more for their insurance cover because they can’t afford to pay for it all in one go. Additional charges for paying for car insurance monthly instead of annually could mean an extra £160.

The SMF, a cross-party think-tank, examined the insurance market for people in poverty in partnership with Fair By Design, which campaigns to end the “poverty premium” – the extra costs people on low incomes and in poverty pay for essential products and services.

The research found that just 7% of people believe that it is fair that those on lower incomes pay more for their insurance, and the majority (66%) believe that it is unfair. Findings are based on a survey of more than 1,500 adults from low-income households in the UK, and focus groups with people living in poverty.

The extra costs that make insurance more expensive have a knock-on effect on insurance take-up, already low amongst lower-income families. This can leave people unprotected against life events that could push them to the edge. The SMF estimates that 5 million people in poverty would find it impossible to pay for an unexpected cost of £500 without outside assistance. Over the next five years, an estimated 2 million people in poverty could have to face an insurable loss.

The report concludes that despite the existence of the poverty premium in insurance, neither the Government nor regulator are prepared to take action, as each points to the other as being responsible. The report calls on the Financial Conduct Authority (FCA) – the industry regulator – to urgently investigate the causes of the ‘poverty premium’ and report on firms’ approach to the issue. It also calls on the Government to take action on the findings of this investigation and consider solutions such as State-backed insurance products for people on low incomes or banning certain rating factors.

Martin Coppack, Director of Fair By Design, said:

“What’s clear from this research study is that people are not happy about being charged more for things that are outside of their control.

“Insurance helps us weather all kinds of financial storms. We all want to feel like we have a safety net.

“But we have two types of markets. One that works for the heathy and the wealthy, and one that penalises people for being poor. 

“Sometimes we have to have insurance, like motor insurance, which is a legal requirement. For motor insurance, you can pay hundreds of pounds more simply because of where you can afford to live – no matter your claims history. What’s more, if you can’t afford to pay your insurance all in one go, you can end up paying well over another hundred pounds.

“The Government says this is a job for the financial regulator to consider, while the regulator says this is something the Government should sort out. We are stuck in a continual policy ‘ping pong’, while those on the very lowest incomes continue to pay more for being poor. This is why we are calling on the regulator to investigate the poverty premium in the insurance market to put an end to this stalemate.”

James Kirkup, Director of the Social Market Foundation, said:

“Insurance is rightly seen as an essential good, something that everyone should have to protect them from unexpected losses.  Yet the insurance market is operating in a way that means too many people in poverty either can’t afford that product, or face unexplained higher costs when they do buy it.

“People going without insurance reflects both the cost of living crisis and the way the insurance market works for people in poverty. We need politicians and regulators work with the insurance industry to investigate the causes of the poverty premium so that everyone can get this vital product at a reasonable price.”

“The insurance industry is providing an important product that supports the finances and peace of mind of millions of households. We hope the sector will rise to the challenge of addressing the poverty premium to ensure even more people can benefit from insurance.”

Comments from low-income focus group participants:

Participant 1: “I had to cancel my contents insurance to be able to pay for my fuel. I hope nothing goes wrong.”

Participant 2: “Insurance is peace of mind you know – life is uncertain and there are lots of commodities in our life that we need”

Participant 3: “I feel that I am penalised for my circumstances. Because we are already suffering and living in poverty, we should not be charged more.”

Participant 4: “[I need insurance]… my car is my life, I can’t live without it as I have mobility problems.” 


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  • The SMF report, Insurance and the poverty premium, will be published at https://www.smf.co.uk/publications/insurance-and-poverty-premium/ on Monday 13th March 2023.
  • The report was sponsored by Fair by Design. SMF retains complete editorial independence of its publications.
  • The report draws on an online survey of 1,537 UK adults living in households with equivalised low income below 60% of median, conducted by Public First, on behalf of the Social Market Foundation between 24th and 29th June 2022. Two in-depth focus groups with people with lived experience of the poverty premium were run by Toynbee Hall and Poverty Alliance during the summer of 2022.
  • The SMF found two distinct reasons for people on low incomes paying more for insurance. At times, some of the higher price can be explained because some poor people are seen as facing higher risks. This could be because they might live in areas with higher rates of crime. But poor people also pay higher prices because of other factors including the premium paid to meet insurance costs monthly rather than in a lump sum and the fact that many people in poverty have single-item insurance policies, which would be more cheaply provided through a household contents policy.
  • Amongst other recommendations, the report calls on Ministers to consider a range of measures, including:
  • State-backed insurance products for people on means-tested benefits or low incomes
  • Insurance Vouchers (like childcare vouchers) for people on means-tested benefits or low incomes
  • The introduction of stricter regulation on pricing, such as greater oversight by regulators and the banning of certain rating factors.
  • A significant reduction in Insurance Premium Tax (IPT)