The perceived value of insurance for low-income households. Stage 2: Understanding how insurance decisions are made.

Insurance is a pillar of financial inclusion, providing protection from unexpected economic shocks. However, Stage 1 of this research found that low-income households are underinsured when compared to the general population. This research therefore utilised a mixed-methods approach to analyse 199 responses to an online survey as well as 98 interviews of Good Money customers, including both those who are and are not insured.

For analysis, respondents were categorised based on whether they placed a high or low value on insurance, and whether they were or were not insured. This created four categories of responders, which were labelled priority insurers, opportunistic insurers, left out or taking chances.

Primary findings were that the cost of insurance is a major barrier to low-income households; the complexity of policies, the claims process and comparing options is a major issue particularly for vulnerable populations; prior experiences of insurance, including claims and customer service, can become touchstone events that colour how individuals value insurance for years; and that those who value insurance repeatedly invoked the ‘peace of mind’ that insurance provides in contrast to the rest of the same.

Ultimately the decision to insure in low-income households involves a series of financial trade-offs, with choices to insure reflecting lifestyle priorities which often change across the life course.

Based on these findings, a series of recommendation are made to make insurance both more accessible and more relevant to low-income households.