Access to insurance products is a key priority for the next steps of the government's financial inclusion strategy, according to a report published today by Ed Balls MP.
The report – Financial inclusion: the way forward – says progress has been made in a number of areas in the financial inclusion strategy, such as reducing the number of adults without access to a bank account from 2.8 million in 2002-03 to 2 million in 2005-06.
But it says key challenges remain if the goal of helping everyone to plan for the future and cope with financial pressures is to be meaningfully realised.
A key challenge is understanding the role of insurance as a product for financially excluded customers, and the government says it will work with the Association of British Insurers (ABI) to investigate the problem of exclusion and how it might be tackled.
In particular, it will look at which types of insurance are most needed by financially excluded consumers, what the barriers are to consumers taking up insurance products and how the barriers might be overcome.
Other challenges for financial inclusion are:
- Increasing the coverage and capacity of third-sector lenders so people nationwide have access to this source of affordable credit;
- Making saving work for low-income or financially excluded consumers, through promotion of products which meet their saving needs, and through targeted saving incentives; and
- Successfully increasing demand for financial services through targeted initiatives, increased financial capability, and realising the potential of bank accounts as a route into wider financial inclusion.
For the next spending period from 2008-11 the government says it will establish a new financial inclusion fund – the exact amount of which will be determined after the Comprehensive Spending Review (CSR) – which will include establishing a ministerial working group to determine detailed priorities for financial inclusion policy and extending the life-span of the financial inclusion taskforce.
The government says it will commit to ongoing support for the provision of money advice and options will be developed which take into account the ongoing collection of evidence from the current projects.
Detailed plans will be published in an action plan following the CSR and the question of how cost-effective, technology-led delivery of advice can be effectively used within a national approach to generic advice will be considered by the Thoresen feasibility study.
The report states: “The Government will, in the light of the findings of the Thoresen review, consider how non face-to-face channels can be used to deliver money advice to more financially excluded people.”
The Government says it will engage with the financial services industry over the coming months to work towards an agreed action plan, with a particular focus on:
- Access to banking and the shared goal;
- Effective usage of bank accounts, particularly among low-income and newly-banked consumers;
- How the banks can support an increase in the provision of third-sector credit leading to nationwide coverage;
- The role of insurance products in promoting financial inclusion goals;
- The role of banking as a route into wider financial inclusion; and
- The role of banks and other providers in helping people deal with financial distress.
The government has also responded to the Pomeroy review on Farepak by announcing it has secured agreement from the hamper industry to establish an industry-led scheme to ensure consumers’ interests are fully protected through the establishment of secure, ring-fenced accounts.
The Office of Fair Trading (OFT) will be given £1m in funding to conduct a consumer awareness campaign on Christmas saving schemes and mainstream alternatives, while credit unions are now offering Christmas saving accounts with a lock-in.
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Emily Perryman on 020 7034 2680 or email [email protected].IFAonline
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