Financial Inclusion Isn’t Optional: What HMT’s Strategy Signals for Insurers

HM Treasury’s 2025 Financial Inclusion Strategy places insurance at the centre of financial resilience and sets clear expectations for improving access to protection across the UK. With two-thirds of renters still without contents insurance and the self-employed persistently underserved by income protection products, the strategy calls on insurers and intermediaries to close longstanding protection gaps.

Affordability, availability, mental health, digital accessibility, and economic abuse all feature prominently. The message is clear: government, regulators, and industry are expected to act in concert to deliver meaningful improvements in support of  vulnerable and underserved.

Below, we outline the key developments and what insurers and brokers should be considering now as the financial inclusion agenda accelerates.

Key Highlights

1. Expanding Access to Contents and Income Protection Insurance

A government-backed pilot (2026–2027) will test affordable contents insurance for social housing tenants. Fair4All Finance is also working with insurers to widen access to income protection for self-employed and gig-economy workers. These initiatives signal a growing expectation that insurers proactively reduce vulnerability among underserved groups.

2. Motor Insurance Taskforce and Pricing Scrutiny

With average motor premiums reaching £635 in 2024, a cross-government taskforce is assessing ways to stabilise pricing. In parallel, the FCA is examining pricing fairness across customer groups, with recommendations due in late 2025. Affordability is now a politically and regulatorily sensitive risk area.

3. Premium Finance Under Review

The FCA has raised concerns around the fairness of premium finance interest rates, particularly for low-income customers. A final market study is expected by the end of 2025. Firms will need to show that financing arrangements deliver fair value under Consumer Duty.

4. Total Signposting for Declined Customers

Building on the FCA and BIBA initiatives, “total signposting” will require firms to help all declined or restricted-access customers find appropriate alternative cover. Integration with PCWs and referral directories is expected to become standard across personal lines.

5. New Mental Health and Economic Abuse Standards

The ABI has introduced Mental Health & Insurance Standards to strengthen underwriting fairness and customer support. Guidance on responding to economic abuse will follow in summer 2026, with expectations around safer, more flexible handling of joint policies and sensitive disclosures.

6. Inclusive Design and Digital Accessibility

A new Inclusive Design Working Group will lead industry-wide improvements to insurance accessibility, particularly for disabled and vulnerable customers. Expectations are rising around digital inclusion, alternative communication formats, and simplified journeys.

Next Steps for Firms

• Product Review: Assess contents and income protection products. Are you meeting the needs of renters and self-employed customers?
• Pricing & Finance Oversight: Review motor pricing approaches and premium finance APRs in light of fair value and affordability expectations.
• Vulnerability Policies: Strengthen frameworks for mental health and economic abuse. Prepare for upcoming ABI standards.
• Signposting Readiness: Update processes to route declined customers to appropriate providers; coordinate with BIBA and PCWs.
• Accessibility Audit: Evaluate websites, apps, documents, and support channels for inclusive design and digital accessibility.

How Padda Consulting Can Help

Padda Consulting supports insurance firms in navigating the financial inclusion agenda through:

• Product & Gap Analysis: Identifying underserved customer groups and opportunities for inclusive product design.
• Premium Finance Fair Value Reviews: Testing APRs, disclosures, and distribution arrangements under Consumer Duty.
• Vulnerability Framework Development: Training teams and embedding policies for mental health, economic abuse, and wider customer vulnerabilities.
• Signposting Implementation: Designing compliant referral pathways and customer communications.
• Board & Executive Briefings: Clear, practical insights on HMT strategy and emerging FCA expectations.

To discuss how we can help your firm meet the financial inclusion challenge, please get in touch.