Could taking out an insurance premium help local authorities tackle homelessness?
What is Transition Insurance?
At its root it’s very simple. Transition Insurance seeks to eradicate the need for cash deposits in the Private Rented Sector (PRS) and replace them with an insurance premium. The cash deposit required to rent a property privately is typically six week’s rent, plus fees. The total deposit can easily reach £2,000 depending on the type of property. Many people who find themselves in this situation in London do not have any way of getting that kind of money together. So what local authorities tend to do is pay that cash deposit to the landlord in order to keep those families out of temporary accommodation. Instead of paying the deposit, the insurance premium will save local authorities a significant sum of money, it will probably cost them somewhere in the region of £200 per year per property. The landlord gets peace of mind, as they will be able to claim for any damage to their property from the insurance provider. Crucially, it will also support vulnerable families to live more independently in the private sector.
What do you think is the most promising feature about Transition Insurance?
I think it’s the simplicity of it. Homelessness is a highly nuanced and complex area in terms of the reasons for people becoming homeless and the support that local authorities have a duty to provide. We’ve identified that one of the key problems that can stop people from having a roof over their heads is that they don’t have the money for a deposit to get into or stay in privately rented accommodation. When this happens, many people are not specified as being in priority need and therefore are not always eligible for support from their local authority. So what this product does is reduces the costs significantly – at less than a tenth of the current costs for local authorities – allowing them to help far more people in a resource-constrained environment.
What do you think are the greatest obstacles to scaling Transition Insurance?
Local authorities all have different models for how they support homeless. Some already use private sector tenancies as the key way of getting people out of temporary accommodation, whereas others don’t. The latter will normally have lots of people in temporary accommodation and may not be used to talking to the landlords in their area. So I think the ones that have those relationships with landlords and understand the private market will probably find it relatively straightforward to adopt and scale transition insurance. London Ventures have big ambitions for this product as the programme believes there are significant benefits for both local authorities and residents to be realised.
Has anything like this been tried before that you know of?
Yes, providers do exist in the market with this type of solution. We’ve been speaking to a number of them over the last six months or so. But there are no solutions allowing a local authority to purchase a premium on behalf of a tenant and then name that tenant as a beneficiary on that policy.
London Ventures ran a provider showcase event on 20 June to look more closely at Transition Insurance. How did that go?
It went very well. Four different insurance providers came down. It’s fair to say there’s a difference in terms of who we’re talking to between traditional insurance providers, who have very mature products and have been in the market for a long time, and start-ups who understand the disruptive nature this product could have on how the insurance market works. One local authority in London, are piloting Transition Insurance over the next three months with a provider called Canopy, to help us understand what works and what doesn’t. We’ll then hopefully be in a place to demonstrate that this is a way of getting more people into the private rented sector.