The joint venture could mean good news for Britons with poor income and according to a report published by the Association of British Insurers, 35% of people in the lowest-income households (less than GBP10,000 per year) in the UK have no insurance at all. It is this group of people who increasingly need insurance most because they constantly deal with higher risks from crime, fire and flooding

ABI says that the new scheme ‘Insurance with Rent’ will allow tenants access to affordable home insurance, paid for weekly, fortnightly or monthly alongside their rent. Reports suggest that local authorities and housing associations run the schemes and collect premiums at the same time as collecting rent.

An earlier research by ABI found that 44% of people in the poorest households purchase home contents insurance, compared with nearly twice as many (82%) in those with average incomes (GBP15,000 to GBP30,000). Around one third had motor insurance and only one quarter had purchased life insurance.

James King, assistant director of markets and regulation at Association of British Insurers (ABI), said: “For people on low incomes, buying insurance is sometimes not a priority. However, it is often the most vulnerable who can benefit the most from insurance. The aim of this event is to share information about how we can all serve this section of society better in order to protect them against risk that they cannot otherwise manage.”

Debbie Southall, social housing schemes manager at Royal & Sun Alliance Insurance Group (RSA), added: “We support the government’s view that Insurance With Rent schemes are a key way of broadening access to basic insurance and believe it is important that as an industry we raise awareness of the availability of these products.”

However, reports suggest that lack of home insurance cover among low income earners has meant that a number of them replace stolen or damaged household goods and around a third of them borrow additional funds, increasing their indebtedness.

A 2007 report by the ABI report also shows that poorer households face far greater risks than their more affluent neighbors. For instance: households with an income below GBP5,000 were 71% more likely to be burgled at least once compared with households with incomes of GBP30,000 or more; arson rates are up to 30 times higher in the most deprived communities; and people with the lowest incomes are also much more vulnerable to flooding.

Stephen Haddrill, director general of the ABI, said: “Insurance provides valuable protection to people on all income levels. The poor are least able to deal with financial loss and depend most on insurance. We need to address the issue of low take-up in low-income groups. A lack of spare cash is the biggest factor holding back the purchase of insurance by lower income households.

“The ABI will be addressing this issue through our financial inclusion action plan. In early 2008 we will launch a new campaign, with a special emphasis on insurance with rent schemes, improved financial education and easier access to insurance for customers with particular needs.”