For lots of people, moving apartments is hampered by difficulties in scraping together a security deposit. If you’re living paycheck-to-paycheck, this can be unbelievably hard.
One insurtech startup trying to change how deposits work is Reposit, which replaces the traditional six-week’s deposit with an insurance bond.
Here’s how it works: instead of ploughing hundreds (or thousands) into a tenancy deposit scheme, where it’ll sit until the end of the tenancy, the renter instead buys an insurance product from the Reposit website, with the landlord listed as a named beneficiary.
This is cheap. A policy costs the equivalent of one week’s rent, plus a £30 annual fee should they stay in the property for more than one year. Should the property be left in an unacceptable condition, the bond allows landlords to access the equivalent of six week’s worth of rent.
According to market research commissioned by Reposit, 49 percent of people have had to borrow money from banks, relatives, and other lenders in order to find the funds for a deposit. Many face cash-flow problems as they wait for their original security deposit to be released.
There’s also the case that deposits are a pretty inefficient use of money. In the UK alone, around £4.5 billion is tied up in deposit schemes that aren’t gathering interest, or being invested in anything useful.
By using a cheaper alternative (and, let’s face it, most people don’t get their full security deposit back), punters have the opportunity to invest their money, or just do things like buy furniture.
Insurtech, like the other ‘techs,’ namely fintech and proptech, has a propensity to be a little dry. That said, it’s always exciting when something comes along that could actually help ordinary people that struggle to get by. I don’t doubt that this’ll be of interest to “generation rent.”
The company says that so far, it’s saved renters around £1.3 million on deposits. It’s also poised to grow across the UK, and today announced the closure of a £500,000 funding round. To date, Reposit has raised £950,000 from investors.
That said, will landlords share my enthusiasm for the product? I’m not sure. In my experience, they tend to be a deeply conservative bunch, who stick to tried-and-tested processes. Phone calls and old-school bank transfers are as high-tech as they go.
I’d wager that most letting agents would stare blankly if you even mentioned “insurtech” to them, let alone tried to convince them to radically change how their businesses work.
And then there’s the fact that many landlords would prefer tenants to have a financial stake in the renting process. The argument goes that if it’s their own money on the line, the renter is incentivized to look after the property. If an insurance company is picking up the tab, they’ll be more inclined to trash the place.
That’s a belief held by 61 percent of landlords, according to Reposit’s research, but does it play out in practice? The startup doesn’t think so, pointing out that the policies don’t indemnify the renter against everything. If they’ve caused excessive damage, they’ll still be on the hook.
It’s an interesting approach. Now we just need a startup to get rid of letting agencies — and the assorted onorous fees — and renting might, just might, become a little bit more bearable.