Welcome to the Treasury Select Committee on Wednesday 4 March 2026. We are here today to continue our investigation into the financial inclusion strategy that the Government unveiled before Christmas, which is an area of great interest to the Committee. For the first of today’s two panels, representing the banking industry, we are pleased to be joined by Jas Singh, the chief executive of consumer relationships at Lloyds Banking Group, and Stephen Noakes, the director of retail at Nationwide, which of course is a building society, but with a heavy retail presence on the high street—I should have been careful and not referred to banks. We have some declarations of interest to make.

I have a family member who works at Nationwide building society, and there is an account with Lloyds.

Since 9 February, I have been a non-executive director of Open Banking Ltd.

I have a family member who works for Allied Irish bank, just so that we are all clear.

We have two panels today, so can you answer the questions from your perspectives as a bank and building society? This is a broad one to kick off. I will start with you, Mr Singh. What do you view as the main causes of financial exclusion for your sector? Can you tell us what you think of the Government’s strategy?

Financial exclusion is a fairly complex topic with many different interrelated sub-themes at play—access to banking, access to savings, access to credit, etc. From my perspective, there are two main themes that are the biggest drivers for financial exclusion. The first theme is around capability and confidence. We can expand on that, but that is the one big thing that drives financial exclusion. The second big theme, I guess, is the absence of understanding the interconnected nature of the systems that drive financial exclusion. Very often our conversations about financial exclusion are limited to or focused on products, not the interconnected nature of financial exclusion. I was absolutely honoured to be asked by the Government to join the Financial Inclusion Committee to help shape the strategy for the Government, and in addition to that, super-proud of the fact that I had the opportunity to lead the digital inclusion and access to banking sub-committee. Again, we can touch on that if that is helpful. On your second part of the question and what I think about the strategy as set out, because this is complex and has many different facets I think it is a coherent framework for the country to start thinking about financial inclusion. It touches on all the main topics that drive exclusion, which are access to banking, access to savings and credit. It also touches on some of the cross-cutting themes that are common across financial exclusion, so I think it is a coherent framework. It is the right place to start. As always with strategies, the impact is felt in the outcome. The impact will be when we see progress in a couple of years’ time on whether we have made the systemic impact that the strategy intended.

Mr Singh, you said to start thinking about it. Are there things missing that the Government need to start thinking about sooner?

I don’t think there are many things missing, but there will always be facets of financial inclusion that you would want to do more of, or things you would want to prioritise. Let me give you a couple of examples of things that could have been considered. The financial inclusion strategy does not think about pensions as a particular area of focus. For the vast majority of people, employment and pensions give them sufficient long-term financial resilience, but there are about 4 million across the UK who are self-employed. We did not get into the topic of how we should think about pensions in the strategy. I will pick another topic. The financial inclusion strategy talks about financial education, and it does a really good job of focusing on primary school education. There is equally an opportunity to educate young adults about financial skills, because the absence of financial skills and understanding money does not reside today with only kids; it also resides with young adults.

Mr Noakes, what do you see as the main causes of financial exclusion, and what is your evaluation of the Government’s strategy so far?

You will see me repeat some of the comments that Jas has already made. At the high level, the points in terms of education, resilience and access are absolutely the right territories. One of the questions that you posed was whether there were areas that we did not touch on in the early work. Access actually has a number of different dimensions. There is access to channels, but there is also access from a communication perspective. For example, Nationwide has been doing some work, in conjunction with the Stroke Association, with the provision of speak-easy cards. In a branch environment, customers who have gone through a stroke can use speak-easy cards to communicate more coherently to staff what their requirements are. As part of the go forward work through UK Finance, there is a desire in terms of inclusive design. UK Finance has recently reached out to 200 charities and organisations in civil society to ask for additional ideas on how we can be inclusive for individual segments within society. That is very difficult to do in terms of the early work, because that would be covering far too much ground, and you would never get to the initial report, but it is absolutely the right thing to do, as we now move forward and make sure that this is an inclusion strategy that works for everyone.

Mr Singh, in your opening comments you talked about systemic issues. I am not sure whether you tuned in to our previous session, but we had Mr McAteer of the Financial Inclusion and Markets Centre in front of us. He said that there is nothing in the strategy that the industry would not like. Do you want to contradict him on that point? Is there something that you would like to see taken out of the strategy?

I speak on behalf of Lloyds Banking Group. We feel it is important that we are quite actively contributing towards increasing financial inclusion in the country. Any steps that make progress towards that goal should be things that we like.

You accept that there are systemic issues; usually, systemic change includes a bit of pain within it. I guess Mr McAteer is saying that if the industry seems entirely comfortable with what is being proposed, we are probably not having enough systemic change. Do you disagree with that fundamentally?

I am not sure how to respond to whether I would agree or disagree with that, but there are quite helpful steps that move things forward. Generally—thinking about large banks and the banking industry—we would all want to lean in and help with financial inclusion. Steps that move that forward are great. I will give one example, picking up on the example Mr Noakes used on inclusive design. That was actually one of the recommendations that came from the sub-committee that is focused on digital inclusion and access to banking. The reason we came up with that recommendation was that we realised there is limited advantage or benefit in some banks or building societies, but not others, having better accessibility in their journeys. In fact, it is better for there to be one consistent experience—back to my point about the systemic—that all customers get, no matter who they bank with. Hence the thinking was, “Wouldn’t it be great if you got inclusive design standards”—in this case we said we would get UK Finance to help co-ordinate and bring together all the inclusive design standards—“and make sure that everyone in the banking industry adheres to those standards?”

Mr Noakes, if I could put the question in a slightly different way, is there a part of the strategy that you think will be particularly difficult for industry to deliver? In the early conversations with the Government, was there anything you felt had to be ruled out because it simply was not going to be deliverable?

I don’t think there is anything at the high level that will be insurmountable for the industry, but there are definitely areas that will require greater effort. For instance, in terms of access to banking and the provision of basic bank accounts, one of the key challenges we face is meeting financial crime commitments in terms of ID&V. The pilot work that HSBC has done—

Is ID&V identification and vetting?

Yes—sorry. The pilot work that HSBC has done with Shelter and with individuals with no fixed abode has now onboarded 8,000 customers through that journey, and through UK Finance the rest of the industry is about to follow. That is one part of the, I think, 0.9 million customers who are still unbanked in the UK. In many instances, that is because of the challenges in terms of the ID&V documentation. We found a solution for those with no fixed abode, but there will be other challenges as you start to work your way through the 900,000 who continue to be unbanked. That is where the trade-off will be with financial crime, and that will involve conversations with regulators in terms of where you draw the line and what the right approach is. It is not insurmountable, but it will require some heavy activity.

My second question—both can come in with answers if you have them—is whether anything has changed in the Government’s approach since the start of the conversation around this strategy because of input from industry. Can you point to an example of a way that the Government have changed the outcome of the strategy from where it was intended to be because of the input from industry?

The one area that I would touch on in terms of access to affordable credit—there was a sub-committee that we were represented on in terms of that activity, led very well by Fair4All Finance—is that I think the Government have definitely had a greater realisation of the role that credit unions can provide, and for good reason. We are probably closest to that, because many of those credit unions are members of the Building Societies Association as well, as are, clearly, fellow mutuals. But across the Irish sea, in the Republic of Ireland, there are assets in credit unions of €21 billion, yet the size of the credit union sector in the UK is £7 billion.

Just to be clear, when you talk about their role, you think they could play a greater role.

A much greater role, but you therefore need to find a way to allow the credit union sector to grow. The Treasury has been very keen to move forward on changing the common bond, which at the moment restricts the size of an individual credit union, typically from a geographic perspective. That is challenging. To fulfil that objective, you need to continue the work that ABCUL, the trade body, is driving on professionalising the credit union sector.

Finally, Mr Singh, you are on one of the committees, so you must have produced something. What changed as a result of your input?

My observation, Mr Dean, would be that the digital inclusion and access to banking sub-committee was not an industry team recommending something separately. We had a coherent committee that included members of other banks, someone representing fintechs, the FCA and members of the third sector, so we had a very different set of inputs along the way. As we came up with our three recommendations, it was not that the industry was recommending something; it was a cohesive group of people who came up with the three recommendations.

One of the things that seems to be rather lacking in this is that although we have talked about having outcomes, there is no way of measuring those outcomes. The Government have said they will consider having outcome measures. What is your take on that? Do you think that is enough? Do you think there should be a better way of measuring outcomes, and how would you go about that in your business? Perhaps we will start with Mr Noakes for a change.

There definitely need to be outcomes. The reason they are not clear at the moment is that pilot work is proceeding in pretty much each of those individual pillars. We need to see the outcomes of that before we can set the targets and the level of ambition. If you take a step back, addressing the challenges in financial inclusion includes digital inclusion. We still have 2 million adults who are completely offline. That will not get fixed in two years. That is a five to 10-year approach. We need to do the pilot work to understand the size of the ambition that we can set in the short term, but we will continue to need to come back to it and work out where we need to raise the bar.

The Government are just saying they will consider this; they are not saying that they will set clear targets for outcomes at some point. Could that just let organisations—banks and large building societies—off the hook?

I think it is critical that targets are set. That builds on the point that Jas has already touched on. There needs to be a consistent approach across the industry. In the absence of those targets, you will inevitably get a spectrum. There will be those that are enthused and want to achieve, but others might be more laggard.

Although a consistent approach and common targets are good things, if the Treasury does not set targets in two years’ time, would you set them internally at Nationwide?

There are examples where we already have done. To touch on a couple, on digital inclusion we have set a target as part of our responsible business approach. We are looking for 3 million interactions in a range of digital tools. Critically, within that is face-to-face digital coaching for those that are completely offline. That is by 2028. We are on track to do the first million in the first year. In addition to that, we have a target for getting 500,000 customers new to saving in the most deprived areas of the UK, again by 2028. We have already set some of those targets.

Is that public?

It is all in the public domain.

Mr Singh, what about Lloyds?

I have a couple of other observations. I completely agree that the strategy should have measures and outcomes. The thing I would go back to is that we should think differently about how we measure both capability and confidence. It should not be about the number of things we did or the number of things the strategy enabled; it should be about whether we found that customers—citizens, people—felt more confident about managing their money. That should be part of the conversation that the Government have when thinking about implementation of the strategy. On your second question, similarly to Nationwide and many of our other peer banks, we have a comprehensive set of activities to increase digital inclusion and financial inclusion broadly. However, you might find that every bank and every building society has different areas of focus. Let’s go back to the example I used on financial education earlier. Last year, 300 of our colleagues spent time in schools and taught about 1,200 students. That is great. That is one area that we focus on. We are quite clear that we have the largest basic bank account proposition across the UK: more than 25% of basic bank accounts are provided by us. That is not a target that we set for ourselves, but we are quite proud of the fact that we provide basic bank accounts. Every one of us will have outcomes, but if we are trying to get outcomes as a national strategy, we might want to think about consistent measures.

I will come back to basic bank accounts and Lloyds in a moment. I will go to Mr Grady briefly in a moment. In the strategy, the Government said that they want to have a positive impact on, for example, UK working-age adults with savings, particularly those with savings between £1,000 and £2,000, to provide household resilience; unbanked adults; UK adults in financial difficulty; and UK adults who both need and use debt advice. You have given some examples and Mr Noakes talked about pilots. Should there be proper metrics on all these so that they can be measured? Are there any areas that would be particularly difficult for you to provide information on?

I cannot see any reason why there would not be targets on each of those areas. In some instances, we will need to work through pilot activity to determine where we set them. The area of unbanked people, which I mentioned earlier, is a classic example.

That is quite easy to measure, isn’t it? Another one that is perhaps harder to measure is the financial capability of children and young people in the UK. For all that Mr Singh is doing in sending colleagues out to schools to talk about it, there are 300 people doing a certain number of visits. It is measuring an activity, not necessarily an outcome. Some will be harder to get metrics for than others.

They will, and inevitably some will lead and lag. On financial education, that will be a classic example where the number of interventions is probably more measurable, but is the level of capability judged in terms of a test that people need to take, or is it their propensity to move into that in the future?

I am driving at whether these should be static. You must have some consistency of measurement to see progress, but do you think that, nevertheless, there may be a need to look at changes over time? You have just given a good example.

I would come back to the fact that in each area, you need metrics, even if initially some of those are going to need to be lag versus lead.

I will make a couple of points from Lloyds Banking Group’s perspective. In some areas, there are things we do at scale that we support customers with. Let me mention a couple of areas. We know that 10% of our customers have no savings at all, and for those customers, talking to them about savings products is the second step. The first step is: how might we help them maximise their income? All our customers can go into the app and connect to or find benefits that they are missing. We are quite pleased with the fact that we have been able to help customers connect with £100 million of benefits that were unclaimed. That is great. That helps that segment of customers differently. Separately, for some people who have minimal savings—your example, Chair, was people with £1,000 of savings—we need to help them build a much more regular savings habit. One of the things we offer customers is Save the Change, which means that every time you spend, you round up your spending and put it into a savings account. We have had over 2 million customers use Save the Change to build a better savings habit.

So you are measuring an activity, but actually that is also very linked to an outcome. There is a lot more to talk about there, but I will go to John Grady.

It is a convenient point to raise this, actually. It would be helpful if you both wrote to the Committee to set out what your organisations are doing for digital inclusion. Mr Singh, as chair of the digital inclusion and access to banking sub-committee, how are you going to set about monitoring and testing what activities have a tangible effect for people who are offline, or who need offline services or lack digital consequences? How will we measure this, because it gets to the root of what Dame Meg and Mr Dean have been traversing?

As part of the digital inclusion and access to banking sub-committee, we put forward three main recommendations to the Government as part of the broader report. The first was: how do we make it easier for people with no fixed address to open bank accounts? Mr Noakes touched on this before, but different banks have different journeys and levels of support that they provide to people with no fixed address. An example would be prisoners. We currently work with and support prisoners in 47 prisons across the country. We help them open bank accounts, but that is not consistent. One of the big recommendations is about how we make it consistent. The measure of the outcome would be: if you fast-forward to sometime in the future, are there fewer people with no fixed address who do not have access to bank accounts? That is one measure. Our second recommendation was about—I touched on this earlier—how we might make inclusive design a standard and make that consistent across all parts of banking across the UK. By banking, I mean banking, building societies and fintechs. How do we make it consistent across them? We should think about how we measure progress on that. In the short term, the measure will be the number of inclusive design standards that have been set up by UK Finance. That would be a really good starting point, so at least we can point to saying that there is one set of standards, so if you are visually or hearing impaired, you know there is one way to experience services differently. The final thing that we recommended to the Government as part of the strategy was a cross-industry coalition to think very differently about digital inclusion. The cross-industry coalition is currently being led under the Connection Project. It brings together not just banks, but telecoms, tech companies and charities to think about a systemic addressing of what is holding back digital inclusion for customers.

Briefly, you are just commencing that discussion, and it must therefore follow that you have not yet identified the outputs or how you will measure them, because you are still at the diagnosis and investigation stage.

Yes; you are absolutely right, Mr Grady. We have made those recommendations to the Government. As part of the next phase of the evolution of the strategy, there will be conversations about the measure of success.

My final questions are about data. In the past, banks and building societies have been reluctant to publish data, particularly on fraud, because that can have an impact on whether people then bank with an organisation. Do you think that the bank should publish firm-level data? You talk about what you do publish, but if there is a consistent request to publish it, are there any reasons why you would not want to publish data on financial inclusion?

None that I can see.

A number of things that we do on financial inclusion we are actually very proud of, so I don’t think we would be nervous about—

This is interesting, because in a previous session, we had a witness talk about Lloyds back in the day—this was historically, and they stressed that this is not the case now—when you were already one of the major providers of basic bank accounts. They said that the largest supplier of basic bank accounts, which was Lloyds bank at the time, did not move people from fee-charging accounts to fee-free accounts, because it thought it could get away with it as it was not going to have to publish the data. That is historical. We now know, as you have said, that 25% of basic bank accounts are provided by Lloyds, and they said you have changed your behaviour since then but that it was the transparency required in publishing data that led to that behaviour. Would you generally agree with that for your organisations?

I do not recognise the fact that we chose to charge customers with bank accounts because we didn’t want to publish the data. I can contextualise that in a couple of different ways. We have 2.1 million customers with basic bank accounts. Over the last few years, we have helped more than 1.5 million customers graduate from basic banking accounts to full facilities accounts. The issue that was referenced in the previous conversation was a transitional one in early 2016.

Okay, but do you agree that publishing data is really important, to make sure that all participants, banks and building societies, are—

Just to build on the issue of publishing data, as Mr Noakes said earlier, we would be very happy to publish data, and we feel proud of the data that we have. We should always continue to think about what impact or outcome we want with the data. If the data is just reporting, it is fine.

Mr Noakes, do you think it is important to publish data?

Going back to the point about making sure that there is a consistent approach across the industry, it is important to see everyone’s contribution to that. You will see very quickly if people are overplaying or underplaying.

One of the interesting things is that when this Committee wrote to the top 10 banks in the UK to ask about outages, the data we got back was often written quite differently. We did not suggest a set of metrics, because we are a Select Committee, so it was not really our role to do that, and it came back reported rather differently. How challenging would it be for your organisations, if Government set a requirement about what data needs to be published, to do that consistently, because your internal system might not generate the data in the required format? Is that a barrier at all?

I don’t think it is, because in most of these areas the metrics would be pretty clear. They will need to be defined, but I don’t think that would be a challenge.

Okay, that is helpful.

There are a number of areas where we already provide consistent data across the industry. The FCA has reports and the PSR has reports. So there have been a number of areas of progress in the past, where, once the standards are defined and the definition is consistent—

That is very helpful, thank you.

I want to ask specifically about an access to banking issue relating to economic abuse. You will know that male partners can withhold ID or have maybe damaged the credit history of their partners over time, and that can stop them from gaining access to bank accounts. There is a piece of research done by Surviving Economic Abuse, which you may have seen. It surveyed women and although 55% of them sought help from some sort of body or organisation, only 4% sought help from a bank or building society. Why do you think that women, when it comes to economic abuse in particular, do not feel like they can turn to their bank or building societies for support?

One of the key challenges there is making clear the opportunity for them to do so.

Has that been insufficient to date?

We have information on websites, but the challenge that we all need to lean into more is to make sure that all our customers are aware of that opportunity. If they decide that they particularly want to go through the website and see that information, they will know that they can, in confidence, approach us, and we will deal with that issue. If that economic abuse goes to being domestic abuse, and is actually physical, we, like many others, also have safe spaces within branches to deal with that. But I do not know if that is widespread knowledge. There is an opportunity—again, better done at an industry level—to say that if you find yourself in this situation, all your banks or building societies would be able to support you. It is far easier to communicate at an industry level rather than one by one, particularly in an environment today where propensity for multi-banking is actually very high.

I completely agree with Mr Noakes. Building on that, at Lloyds, we have a dedicated team who focus on supporting customers with domestic or financial abuse. They are trained by Surviving Economic Abuse, and we get training from it on how to talk to customers. Some of the changes we have tried to make in the recent past include making it easier for customers to send us messages from within the banking app. Very often, we find that it is hard for victims of economic or financial abuse to contact someone else. We have found it quite helpful to have customers message us from within the app and then reply to them and provide them with support.

It is also about training for staff to be more conscious of this issue. It is good to hear that you have measures in place. However, perhaps we could track that measurement of 4% next time to see if people have more confidence to approach banks and building societies in future.

I will quickly follow up on that topic, because it is something that I pursue as a constituency MP. You have spoken to Surviving Economic Abuse, Mr Singh. In the social landlord sector, DAHA provides external assurances to social landlords about whether they are doing the best by victims of economic abuse. Specifically, it provides training and audit. It is run and formulated by victims of economic and domestic abuse. Is there anything similar for the banking sector, and if not, would Lloyds and Nationwide consider encouraging the formation of an expert cohort that could help banks and building societies raise their games on this?

The short answer is no, but is there an opportunity? Yes. Going back to the earlier discussion, this is not an area that any of us look at for competitive advantage. We generally want to improve the situation and ensure that there is better financial inclusion for everyone. Sharing of best practice and doing activity on an industry-wide basis is always going to be the best way of doing that. If there are examples where that has worked elsewhere, we should learn from them.

I completely agree with Mr Noakes. I am hoping that as we think about expanding the work on inclusive design and start to get consistent standards and inclusive design across the banking industry, we should hopefully also get a consistent level of support for any victim-survivors of economic abuse.

Moving on to online and offline exclusion, realistically, there are some people who will never be able to use online banking for all sorts of reasons. Those are most likely to be more expensive customers to serve. Is serving those customers commercially sustainable in the long run for your organisations?

Serving our customers face to face in our branches remains vital to how we serve our communities. Having said that, banking has profoundly changed over the last few years. Now, 95% of our customers bank with us online. We have 21.5 million customers using our app and 6 billion log-ons a year. That is a lot of people engaging with us online. However, in our world, digital access does not translate straight into digital exclusion. We want to make sure that we are there to help the at least 5% of customers who need help with either face-to-face services or access to cash. At Lloyds, we look at our comprehensive national branch network, access of community bankers, access to banking hubs and the Post Office. Equally, we are the only bank to have built a partnership with PayPoint which allows people to have access to many other places.

I am asking a simple question: in the long run, is it commercially sustainable for Lloyds group to serve that 5% well?

There are two ways to think about it. I know that you are asking the question about whether it is commercially sustainable, but we value the customers and communities that we serve. Having said that, we would want to make sure that we can continue to provide these customers with the capability and confidence to get comfortable using digital skills, and of course, it will be at their own pace.

But to be clear, there is a group of customers—we have heard evidence on this in previous inquiries—who will never in a month of Sundays get online. Some of them might well be people who are digitally confident and then become less digitally confident as they get older, as my father did, for instance. So it is about that set of customers. It strikes me that at Lloyds you have internet-only banks with a very different cost base, very different IT systems and all the rest of it. I suppose, ultimately, your board of directors will have to decide whether you continue to serve customers who can be dealt with only face to face, because no amount of digital inclusion training will help them get there. Is that core of 5% something Lloyds is committed to serve for the future and is it commercially sustainable to serve?

Yes, we are absolutely committed to serving our customers in the channels that they need supporting.

Okay. Mr Noakes?

The business models that we have are different. Nationwide is a mutual. Its shareholders are therefore its customers, so the decision process looks different, as does the demographic of the customers. Although we both have large-scale businesses, the needs of those customers look different. In the last 12 months, 56% of our customers used our branches. For Nationwide, it is not a minority offering. If you look to the demographic of the average Nationwide customer using a branch, it is typically older. We are probably seeing a disproportionate number of those customers who are offline, but I think it is good for the development of the banking sector that you have a large mutual—it is not just ourselves; other building societies are in the same situation—that will continue to do more channel of choice. I think that situation will exist beyond 2030, when we currently have our branch commitment to.

Let me approach the question in a slightly different way, with reference to my seat. Virgin Money in Baillieston is keeping its branch open. I am disappointed that the Bank of Scotland is closing its branch in Garrowhill, but this points to a wider question. We have to accept that there is a cohort of customers who will never be able to bank online. Can the commercial market guarantee a minimum level of in-person service, or is there a need for some sort of co-ordination and compulsion by the Government to maintain that? If there is not, banks and building societies that continue to do that will be at a commercial disadvantage. Mr Noakes, do you think there is a need for an element of compulsion in terms of an underpinning so that everyone plays to a minimum at least?

We need to recognise that business models are different. The important thing at an industry level is that there continues to be a competitive service for all customers. To the point I mentioned earlier, 56% of our customers are using our branch in a 12-month period. We see a situation where banks have closed branches close to us. Some of those customers that are desirous of that face-to-face service move to Nationwide. If that situation continues, it still works for society in aggregate.

Mr Singh?

I don’t think you need a firm regulation to move that conversation forward. If you think about it, Mr Grady, there is a comprehensive system that operates today on a voluntary basis across the banks, whether that is bank branches, or our partnership with the Post Office or its banking hubs.

Thank you very much. That is enough from me, Dame Meg.

From one John to another: I call Mr John Glen MP.

Before I ask my question, Chair, let me say that I neglected to declare that I am a member of the Financial Inclusion Commission and I co-chair the APPG on financial education for young people—sorry about that. Can I turn to the issue of support for savings and what is going on? If we look at the strategy, it focuses on the imperative around building a savings buffer. Would you like to tell us what your banks and the sector overall is doing in that regard?

We did some work with the Building Societies Association and the University of Bristol, and the research confirmed that households that get to £2,000 of savings are 60% less likely to have a challenge meeting bills. But even a small buffer makes a big difference to their resilience. It is critical to start developing that savings behaviour. In the steps to saving, which the research also talked about, that is a pathway to potentially getting into home ownership and beyond. It is absolutely important that we do that.

On that point, when you think about your lending criteria, how do you accommodate the insight that you have just given us with the imperative of finding a savings buffer with what you lend? Those two things are quite important to put together.

Savings will typically give you a sense of the level of deposit that a customer is able to make. If, essentially, they are able to clear savings on a monthly basis, that gives a sense of the affordability to the loan as well. Those are the steps to saving, but I shall go back to the start, which is the number of households today that are nowhere near £2,000 or even the £200. This is where the broader initiative comes in with national savings week and the commitment to get 2 million customers who currently are not saving to start that savings habit by 2030. That is a Building Societies Association target, and we fully support and embrace it.

Isn’t there a contradiction here with the profit imperative? Maybe it is somewhat different at Nationwide. The members of your sector can sell credit. At the same time, the savings gap in this country—the lack of a savings buffer—has been bad for a long time. There will be some that look at this and think that, unless there is a more active intervention from the Government in prompting people to save, this problem will not be fixed. How would you respond to that?

I think you can see it just in terms of behaviour. That is from ourselves, and I am sure that Jas would say the same for Lloyds. If you think about regular saver products, which are encouraging that day-to-day saving, typically, it is a save of up to £200 a month at an interest rate of 6.5%. If you put a commercial lens on that, I am not sure it would pass the hurdle, but it is the right thing to do. Essentially, you are often moving that money away from a current account, which is probably paying zero interest or a very low interest, to that 6.5%. It is not driven by a commercial factor. There is a genuine desire to support customers in that way.

Mr Singh, how would you respond to that?

If you start the conversation about savings, savings is a net effect of other choices that people make in their life. We should think about how we help customers increase their income. I touched on this example that Lloyds does, where we make it easier for customers to get access to benefits. The second thing is how we make it easier for people to budget for expenditure. At Lloyds, we have a feature in the app that gives you a view of payments coming up in the next few days. Typically, people with lower financial resilience are more likely to use that feature, because they care more about what money they are spending. That is important. Then when we get to the discussion about savings, we do not think about it as a commercial imperative. We think it is the right thing to do to make sure that customers can get access to the savings ladder.

What about the issue of the opt-out or opt-in, in terms of savings from payroll? I understand that both the strategy and Nest Insight have highlighted that opt-out payroll savings are the gold standard, but currently there is a reliance on a complex regulatory workaround. As representatives of some of our largest banks, do you have an ask of the Treasury to fix this?

That is a great point. The Nest opt-out, opt-in scheme makes a difference in workplace savings. You are right: in all our experience, opt-out makes the take-up much higher. There is definitely that consideration. The counter to that—the reason why the strategy may not have got to that recommendation—is that in some cases, employees need to think about what is best for them. In some cases, in opting into a savings scheme, they might lose out on pensions, which might have PAL, matched benefits and so on, so I think it is a little more complicated.

This is always the argument, isn’t it? It is always about the long-term savings on pensions versus having a bit of resilience to avoid high-cost, unaffordable credit. Do the Government not just need to bite the bullet where previous Governments have perhaps failed to, and create a clear pathway toward people having a savings mechanism that gives them access to much less expensive money for emergencies?

Yes, and again, the next question is whether the Government should bite the bullet now. My recommendation and ruling would be that we should start with what we have set out in the financial inclusion strategy, make sure that we measure progress and get started on the list of things that we have talked about. If in a couple of years’ time we have not made enough progress, maybe it will be for the Government to decide whether there is a need to move towards legislation.

I suspect that we will go around on this wheel again. The self-employed, of which there are roughly 5 million, do not have the same options for saving using bank accounts. How should that be fixed?

The self-employed have access to bank accounts to be able to save. Where they might currently lose out is in the absence of a pensions scheme that gives them the opportunity to save for the long term.

Why do the banks not develop a mainstream auto-save product that targets incoming BACS payments, which would be a routine vehicle for the 5 million self-employed to have that savings option?

That is a good idea, but in my experience generally, things that are auto-saved or do not require customer engagement do not necessarily end in a good outcome in the long term. You might find that if you are automatically saving from someone’s salary, you are not giving them the choice to make a decision on what they want to do the next month. For instance, if someone’s boiler has broken down, they may need that extra bit of money to fix it. An auto-save scheme does not engage in that conversation. I think it is better to make sure that customers actively engage with and build savings habits. Another topic that we have not touched on so far within the world of savings is that we should and do spend a lot of time making sure that we reduce friction for customers to be able to open savings account. How easy do we make it?

Yes, but don’t you also create problems? I speak with some experience of trying to supervise my mother’s savings with your bank—I should have declared that as well. Often, her account will come to the end of a one-year fixed programme and she will say, “John, I have a load of stuff from the bank. What am I going to do about it?” She then gets more papers through and gets anxious, so I have to go down to Bath, take her into the local branch and say, “We just need to transfer this to an essentially very similar product at a slightly different rate.” Is that really the best way of doing that? I think people watching this will understand that interest rates have to change, but can anything be done to help consumers?

Actually, Mr Glen, a number of years ago, the FCA rightly suggested that we change the rules to make sure that you do not auto-renew savings. We want to make sure that customers understand that if their circumstances have changed before they lock in their money for a year, they can make a conscious choice about that.

So it is about consumer protection?

Yes.

I represent a lot of fintechs in my constituency, and they rail against the old-fashioned IT systems of the bigger and longer-standing operators, which would include your organisations. Some of them now have very handy apps where it is easy to create pots, round up payments, make daily savings and do other such things. Those give consumers a choice, Mr Singh, but are also automated. They can be seen; they are very visual. I was interested to hear you say that taking money out of payroll, like what payroll giving would do—there is a mechanism set up for that—removes choice. I am interested to probe that thinking. Is it really removing choice, or is it just that the choice is not very visible?

To build on that theme, it is about making it visible and, as I defined, taking friction out of the experience and making it easier for customers to understand. We use a lot of what we call “nudges”, which include very targeted information to specifically say to people, “Here’s what’s coming up for your money. Do you want to do something about it?” In my view, that creates better engagement with savings on a targeted basis. On the example of fintechs, going back to the discussion about basic bank accounts that we started earlier, basic bank accounts are today offered by the nine largest providers as set out 10 years ago. Fintechs are not including and offering basic bank accounts.

Touché—they attacked you and you have got them back. I shall raise it with them next time.

To build on Jas’s point, that is the risk of automating across the industry. Technology is improving for personalising messages. If there was a standard industry solution, it would provide a disincentive for organisations to do a better job of personalising to an individual customer’s needs, which in my view will always be the best outcome.

It is quite interesting how many people shop around to see the different customer experience.

First, credit is not necessarily good for all customers. As a responsible lender, we need to make sure that customers can safely pay back what they borrow. I am sure that Stephen would say the same thing on behalf of Nationwide. However, I would go back to what the barriers to accessing credit are. Very often, customers do not know what is affordable for them. In the Lloyds example, we started by making sure that customers can see their own credit score in the app. We have partnered with one of the bureaus to make sure that everyone can see their credit score. About 12 million of our customers registered to see their credit score every month. That is great, but the really powerful example is that we can point to at least 500,000 customers whose creditworthiness is going up every quarter because they can see the score in the app.

Is it going up additionally because they have the app?

Yes. Their score has got better because they are looking at their score in the app. There is an analogy with health—this is like financial health. People get fitter because they see measures about their health. That is one example that makes it easier for people to understand. When we talk to people about credit score, we do not talk to them about it in isolation. We tell them what kind of products they are likely to be eligible and not eligible for, which is helpful coaching.

To build on those points, first, we talked about education earlier. Customers’ awareness of how credit works and how they will be viewed in a credit decision is one of the key issues that we still need to address collectively. As Jas has already pointed out, if you have negative cash flow on a monthly basis, the first thing is, how do you build resilience? Like Lloyds, we have calculators that can advise customers if they have additional benefits. Our volumes are smaller than Lloyds’—we only started in the last six months—but 18,000 households have looked at it and 11,000 had benefits. The average they have managed to gain is £560 a month. This activity can be quite life-changing. That is the first conversation. The second thing is an understanding of how the credit process goes. People worry, “If I apply for credit, is that a hard footprint? Does that reduce my credit score?” The reality is that, for most of us, the first engagement with your financial service organisation will be a soft footprint. We need to help with education on that and make sure that customers are clear about it. But that will address those who thought, “Maybe I should be thinking about credit, but I’m worried about what that journey is going to look like.”

If the pilot makes the impact and delivers the outcome for customers—it makes it easier for them to borrow safely and be able to pay it back safely—we would be very happy to look at that. The one thing we are already doing is that we have a different pilot started with Fair4All Finance and supported by the Welsh Government. We have partnered with a fintech to try to think about how we might make it easier for customers who do not qualify for credit with us to be able to talk to a credit union locally in Wales.

Jas has already covered this off, but yes, if the pilot proves to be successful, that is clearly something we would look at. But going back to the point I made earlier, I think it is also about expanding the size and opportunity for the credit union sector. If you went to the Republic of Ireland, that would be the exact part of the market that they would be serving and at a much bigger scale than they do in the UK.

It is less about profitability for us. If there is a customer need there, we would look to serve it, but there is a broader mutual sector, so if we have partners in mutuals where that is exactly the market they operate in, we would also want to work in partnership with them.

When I was a Minister, I tried to get a no-interest loan scheme going, based on a model that was used in Australia. I am not quite sure where it has got to. You are never going to make much money out of the poorest people in our society, nor should you, probably. Do you have a view on how we can make the banking sector as a whole embrace a no-interest loan scheme or, given how technology is moving forward, how you could integrate that programme into your offers for some of your more struggling customers?

One of the ways we have explored that option is making it easier for customers who do not qualify for credit with us to talk to a credit union, hence the work that we are doing with Fair4All Finance and the Welsh Government makes it easier for customers to connect to credit unions. Similar to what Stephen said, I do not think the constraining factor is whether they are commercial. I think the constraining factors might be other things like, how do we make sure we are being responsible in our lending? How do we make sure that the prudential implications of lending to what are clearly high-risk customers are well understood?

So you think you can operationalise at scale across the sector pathways of referrals to credit unions and others. Is that a reasonable expectation to have?

You have some good experiments—pilots—right now that give a sense of how we might do this differently. Traditional ways of approaching pathways are probably not the best way to think about this. I touched on technology, and we have not even talked about AI. The pace of that is going to be much, much faster, so we need to reimagine how we bring different businesses and different entities together to create much more seamless pathways.

To those of us who have been looking at this area for several years and might be a bit cynical about the speed of progress, what encouragement could you give us for this Government’s approach and strategy in this specific area?

We touched before on the Fair4All Finance pilot and how we think about making lending easier. It will be important to measure the impact and outcome of the pilot. I will keep going back to this: the impact cannot be just how many things we did. The impact is also, did we make it easier for customers to build capability and financial resilience? Did we give them confidence to think about managing their money better?

Mr Noakes, do you have anything to add on that subject?

Why would I be confident? It comes back to a question I answered earlier on, which is, are there areas where you have seen Treasury take a different stance? The desire to further support the credit union sector—again, I go back to the comparison: if the Republic of Ireland is €21 billion in assets, we should probably be 10 x the size we are at the moment. That requires professionalisation. We talked about referrals. The other thing that is going to be important is data sharing, because one thing you do not want from a customer experience perspective is a double decline. That should be avoided if we are doing the right job in the way that we work with that part of the sector to ensure that it works.

Finally, do you think there is a cultural problem in the UK? Ireland has quite a distinct culture that has allowed credit unions to develop in that way. Do you think the United Kingdom will be able to embrace that? We have seen a consolidation and a reduced number of credit unions, but what evidence do you see that suggests it is scalable to the level you think it could be?

ABCUL would be a very good witness to bring here. It is doing some fantastic work, recognising the need for that professionalisation, because the challenge is that the operational and security risks you have in financial services are the same for a small organisation as they are for the two of us. Even if it is not consolidation but is shared service infrastructure, that is the way to solve this.

I thank our witnesses, Jas Singh of Lloyds bank and Stephen Noakes of Nationwide building society, very much. Witnesses: Hannah Gurga, Alison Rayner and Nici Audhlam-Gardiner.

Welcome back to the Treasury Committee on Wednesday 4 March 2026. For our second panel, to discuss the financial inclusion strategy that the Government recently published, I am delighted to welcome Hannah Gurga, director general of the Association of British Insurers; Alison Rayner, chief compliance and corporate affairs officer at Allianz UK; and Nici Audhlam-Gardiner, who is a board member of the Association of Financial Mutuals as well as being the chief executive officer of Foresters Financial. Before we get into the main stuff, can I ask you each to set out whether your organisations were involved in the Financial Inclusion Committee or any of the sub-committees, and in what capacity?

Yes, the ABI was involved both in the committee and the sub-committee. I was a member of the Financial Inclusion Committee, and I chaired the access to insurance sub-committee.

Yes, I was a member of the access to insurance sub-committee.

No, the AFM was not a member of any of the committees or sub-committees, but it did offer to be helpful wherever it could.

What does that mean? “Offered to be helpful” sounds like code for something. Was your help received?

Not so far, but I think the AFM has a big role to play as we go forward, given its role in financial inclusion.

We heard that some consumer representatives were not convinced that they were in a position to challenge you. Do you want to explain whether you felt that is the case? Give any examples of where you have consumer challenge.

There were at least six consumer representatives on the committee proper, which was chaired by the Economic Secretary. For the sub-committee that I chaired, I felt that it was important, if we were to have meaningful conversations, to have a range of perspectives around the table. That included four consumer representative organisations alongside the underwriters as well as the distributors; it was broadly a third, a third and a third alongside the regulator, and the Treasury was there as well.

Did you get a lot of challenge from the consumer groups?

I think it would be fair to say that there was healthy challenge of the industry through that conversation, as is right. It was a very constructive process overall, if difficult at times, and ultimately it led to a number of recommendations being put forward to the committee and the Treasury for consideration that ultimately had the support of the sub-committee.

I definitely agree. We certainly had some very lively discussions, and the consumer groups were rightly vocal. After the first meeting, I think it was the consumer groups that requested that we add some PCW representation to the group, which we did.

Ms Audhlam-Gardiner, I know you were not in the room, which may say something. Earlier, I raised the scope and the question of who should be targeted. It is quite interesting, because there are quite a lot of people who are excluded from insurance. There was recently a fire on the Pembury estate in my constituency, and over two thirds of the residents had no insurance. Some of them said they had cancelled it recently—this was back in 2024—because of costs. Can you give us a description of who you think is excluded from insurance and what this strategy will do to help them?

I think the ambition is that everyone is able to access the insurance they need at a price they can afford, and that is something the ABI set out in its own financial inclusion strategy, which we published back in 2024. The Government’s strategy similarly seeks to enable everyone to access the products and services they need. That is the ambition. I listened with interest to the previous session. I think what the Government sought to do is to strike a balance between actions that were ambitious and actions that could be implemented within the timeframe that they were working towards. We see this very much as foundational. There is a lot of work already under way across the insurance industry and through the ABI seeking to enable more people to access the products they need, but we are firmly committed to delivering the recommendations that the Government have made. I am personally committed to delivering them. They are in the ABI’s business plan, and we are making good progress on a number of them already, but it is obviously early days because the strategy was only published in November last year.

Is there anything you want to add, Ms Rayner?

No.

Ms Audhlam-Gardiner?

I would couch the area to be addressed in terms of the gaps. The regulator talks about the advice gap and the protection gap. Take the protection gap, for example: 58% of people do not have protection, and the main reasons are confidence and engagement. I really think that some of the areas that perhaps need to be drawn out a little further in the strategy are about how we provide the right support to give customers that engagement and confidence to make the right decisions to take products. It is not just about product design and affordability; it is about access.

Can I address the Chair’s example? I seem to remember that in previous sessions, one of the issues was whether a housing association could put together collective insurance for multiple residents and almost auto-enrol people into it. One of the issues was the responsibility that would then apparently fall to that housing association for mis-selling and so on. Ms Gurga, could you address that point and tell us where everyone has got to on that? Is it a question of the housing associations not doing what they could centrally to drive uptake because of that concern? Is there room for easement in terms of the Financial Conduct Authority’s treatment of them? As the Chair mentioned, it is clearly an appalling outcome for those individuals. Could you comment on what has happened and where we have got to with it?

If I have understood your question correctly, I think you are talking about low-cost contents insurance, particularly for those who live in social housing properties.

Yes, I am.

That is a focus within the Government’s strategy. It was very much a priority within the sub-committee itself. The final strategy will see Fair4All Finance working in partnership with the regulator and with ABI support. We will be engaging our members through that process, but we need to undertake market engagement in the first instance to understand what the barriers are to uptake, because affordable contents policies are available. The issue is that people are not taking them up. To your point, we had a conversation within the sub-committee about the potential for what I would call an opt-out model. Could social landlords provide this on an opt-out basis? That was not progressed. It was something that we put forward.

It seems like an obvious solution, though. Why was it not progressed?

I think you will need to ask other witnesses why that was the case. When I look at the strategy, it seems very focused on what industry can deliver in partnership with consumer groups. That is right and proper—we need to make sure that we are delivering our part—but there were some opportunities. Nici mentioned advice and guidance. From an ABI perspective, at the beginning of the process, we would have liked to have seen a greater focus on pensions, but we understood that the Government wanted to deal with that separately through the work of the Pensions Commission. Similarly, there are measures within the strategy around income protection, but we would have liked that to go a little bit further.

In principle, going back to the auto-enrolment of contents insurance, it is the obvious solution. It does not cost very much, because the housing association covers the building. If the insurers are prepared to offer the product, there must be a disconnect. I recognise that you do not want to reveal what is going on in private conversations, but for us trying to scrutinise this and get to the bottom of why a perfectly reasonable and workable solution is not available to the poorest people living in housing associations, how do we get the answer to that?

Hopefully, the inquiry will help in understanding a little bit more about some of the decisions that were taken through the process. The work that Fair4All Finance is progressing will give us better insight into what we can do to increase take-up. It is quite possible that one of the findings there is that an opt-out approach would be something—

The Fair4All Finance pilot is carrying a lot of weight already, across the previous panel and already in this panel. Do you envisage that the pilot will inform what industry should be delivering? Is this a first step? Ms Rayner is nodding, for the record.

Very much so. We work very closely with Fair4All Finance. The fact that it has the dormant asset funding available to it is one of the reasons why a number of the actions are with it, because it is in a position to fund pilots for a number of the recommendations.

Has industry considered funding pilots, and your own organisations?

Not to date.

Not in this area, but in other areas, certainly, we are looking to increase what support we can provide to customers through things such as rolling out targeted support, which is a much more economical way for us to help customers.

I was very struck by the fact that 58% were not protected. You were saying, Ms Audhlam-Gardiner, that it is because of confidence and engagement. Even if there are models out there, not everyone is computer-literate enough to hop on a website and find them, whether it is travel or household contents insurance. Could the industry do more to engage people?

We certainly want to make sure that we are doing all we can to raise awareness with consumers of the potential benefits of the products that are available. We are doing that across a range of different product areas, specifically working with Fair4All Finance with respect to contents insurance. It is very much an area we are already working on and will continue to progress.

In my experience, a lot of people come to see me and do not realise that when, for example, there is a flood from upstairs and their carpets are ruined, they are not going to be replaced by their landlord. It is a bit of a mystery to them that they needed contents insurance in the first place, so there is that gap. When you are in the industry, you think about insurance all the time, but there is a whole group of people out there who do not—they are excluded. When you talk about these mechanisms to get people engaged, how are you going to reach people like that?

One of the mechanisms that was a very interesting and valuable approach, through the development of the strategy, was engaging with people with lived experience, and the Treasury facilitated a number of sessions. I think that was very helpful in bringing to life some of the situations and circumstances that people find themselves in, and in helping to educate industry on what we can do to tailor our efforts to better meet their needs.

What is the outcome of that? What is industry going to do to tailor its efforts to meet those needs?

We have a consumer awareness campaign in train, but we have quite a lot of activity beyond the Government’s financial inclusion strategy that we are progressing. The FCA undertook a review of the general insurance market last year. You will probably be aware that a super-complaint was issued by Which? towards the end of last year. There are a number of product areas where we are working with members to make sure there is customer awareness of what is covered. For example, if they already have a home insurance policy, what is covered in the event of a storm? It is also looking at motor insurance, which I know is also a keen area of focus given the pressures on household budgets for many across the country.

Are there any areas of the strategy that will be genuinely difficult for the insurance sector to deliver?

No. Some of the actions that we came up with in the sub-committee are more challenging than others, but generally they are certainly things we can use and build on. Some of them build on actions we have already taken within the industry. The ones that we were particularly interested in are around mental health signposting, travel and economic abuse. If you look at the actions that the industry, and we at Allianz, have taken in recent years, it works quite nicely with the vulnerable customers work we already do. That is definitely an action we can explore and take forward.

There are some things that the industry can certainly participate in that are broader. The idea of filling the advice gap with targeted support, et cetera, could be extended to protection and even to general insurance. It goes back to the point that, as much as awareness can help, people do not buy insurance—it is sold to them. They are engaged by somebody who can really explain the need for it. Filling the protection gap and extending advice to make it really economical and easy for all of us to go out and do that is something that would need to involve regulation, industry and even Government. It is not easy, but it is really important.

That brings me to my next question. What should or could regulators or the Government do to help deliver that? Targeted support is a very good example.

The concept that the FCA is already rolling out, where through targeted support and some very simple questions that allow you to put a customer in a segment and therefore identify their needs in a much more efficient and effective way than having to have an expensive adviser, could easily be rolled out. That same concept and set of questions could be rolled out to other areas outside of retail investments and pensions. I would advocate us all working together on that.

Do the other witnesses agree that the FCA could extend targeted support to your sector?

We have worked very closely with the FCA in developing its approach to targeted support, and we are pleased that we are now in a position to see it roll out. We think it has the potential to be transformational as people take probably some of the most important decisions of their lives when it comes to retirement.

So do you have what you need at the moment? Are you confident that the regulator is in the right place and that this is not going to be an issue going forward?

It is something we will need to keep a very close eye on as it is implemented. You will be aware that the financial services industry, in its broadest sense, has long raised concerns about the potential for conflict between the Financial Ombudsman Service and the FCA on the interpretation of rules. FOS reform and making sure there is alignment is going to be critical when it comes to targeted support, so that firms have confidence that the approaches they are taking today will continue to be considered appropriate down the line. These are decisions that will have implications for years or potentially even decades, depending on when the customer comes for advice.

That is a subject that our Committee is interested in generally. We had some very interesting evidence from Mick McAteer, the co-director of the Financial Inclusion and Markets Centre, when we were discussing insurance. You have picked up on the increased risk profiling for insurance products. For example, if someone has a mental health problem, that can now increase their travel insurance because there is a risk attached to it. Risk-based pricing and underwriting can be quite a barrier to inclusion. Will the strategy make any difference to that risk-based profiling, or is it now so embedded in the sector that it is not going to go away?

I think it is widely recognised, including by the FCA, that insurance is a business that depends on the pricing of risk. That is really how the industry operates, and not just in the UK.

And also the pooling of that risk.

It is the pooling of risk, but in looking at the premiums, the firm is considering the level of risk that the individual or business is bringing to the pool. I do believe that the strategy will make a difference. On the specific example of travel insurance, that is a recommendation within the strategy that we are already progressing. We have convened the first meeting of a working group, in partnership with the Money and Mental Health Policy Institute and the FCA, to help to build a shared understanding of how underwriting decisions are made by insurers for people with the pre-existing mental health conditions that you have talked about. In that first meeting, it was an open but constructive discussion: it was a frank conversation, but participants came away very much feeling that there is a shared commitment and that we are making progress. The ambition is to produce a report towards the end of this year, to be shared with the Treasury, setting out the progress of that forum to date but also identifying whether any other lessons could be applied elsewhere.

Is it really possible to wind back? Now that you have the capability in the insurance world to tailor products based on all sorts of information and methodologies that were not available a few years ago, are you really saying that there is a prospect of rolling back, or is it that you will be assessing the risks that you already know about in a different way?

From our perspective, let me say first that we have quite a small travel insurance book for Allianz UK. We are not a specialist travel insurer, so we would not underwrite complex pre-existing medical condition cases. But for all business that comes to us, we underwrite on an individual basis. We do not have a predetermined outcome, if that is what you are suggesting, within a model that would stop us underwriting a case. We would look at each case on an individual basis.

Looking at financial exclusion, if you have someone with a long-term health problem that can contribute to earning less—unfortunately there is a correlation there—their insurance, if they can afford to go on holiday, will be more expensive. There may be other areas of insurance and other products that are more expensive, so you are building more pressure on an already excluded person. Is that in your mind? Is it something that you think you can resolve, or are there requests in the financial inclusion strategy that will be genuinely difficult for you to deliver? Perhaps we will start with Ms Audhlam-Gardiner.

Not in this particular area of mental incapacity. Going back to being really mindful of how we are designing products, though, asking the right questions and then tracking the outcomes is something that we are all doing—even more so post consumer duty. Some of these things have been very helpful in unpacking the areas that were previously perhaps not so transparent.

I feel that the working group that we have set up is a good foundation. I have noticed that some of the questions are about whether the industry is content with what is in the strategy. We are behind it; that does not necessarily mean that what is in it will be simple or easy. We do feel that it is ambitious, but in this specific case there are advances in treatments and diagnoses. That is what this forum will be very helpful in understanding, to build that shared picture on both sides from the consumer point of view.

So you are saying that more detailed knowledge about somebody will actually make it better.

Potentially: it means that the insurer could have more confidence, because it understands more about conditions, some of which will perhaps have new treatments and new diagnoses. We think that this is a really fruitful avenue for us to pursue. To give you a sense of what the broader context was like, I would say that it was an area that was a little challenging during the sub-committee discussions. But having had that initial meeting, I feel that this is an avenue that will prove helpful for the industry to learn from consumers, medical experts and clinicians, because they are who we will be involving through the process, but also for the consumer representatives to understand what underwriters are thinking about. The other aspect that will be important is the customer journey. As an industry, how can we help to make the process of applying for insurance as simple and comfortable as possible? We are very mindful of how, for people with these types of condition, having to answer repeated questions about them can be quite traumatising. That is another aspect that we will be exploring.

There has to be a lot of trust in the system. I have a final question before I pass over briefly to Mr Dean. In your written evidence to us, Ms Gurga, you said that it is too early to assess the effectiveness. I think you said that right at the beginning—it was early November—and you have hinted that there were some rows on the committee, although you put it more politely than that. Are there any tangible changes that you can point to that might be delivered in the next 12 months? Will we actually see any movement?

With respect to the travel insurance working group, the ambition is that we will produce a report to the Treasury to set out progress to date before the end of the year. That will not be the end of that workstream, but that will be a deliverable for us this year. Another output is on economic abuse. That was a very important focus for us; it was a cross-cutting theme of the strategy. We are already working with Surviving Economic Abuse and other partners to develop sector-wide guidance that can help employees at insurance firms to identify people who perhaps are at risk of economic abuse.

Does anyone else have any tangibles that you expect to be delivered in the next 12 months?

One thing we have done recently on the topic of economic abuse is internal. Within Allianz, we often start a policy with our own staff and then look at how we can use that for customers. We have recently developed a policy hub for domestic abuse and have trained our staff internally on that, for our line management to understand how to support staff. We will look to build on that. We tend to feed through our staff understanding into our frontline staff who are talking to customers. We use that with vulnerability, for example. We educate our staff internally. We are part of the hidden disabilities scheme; we use that with our staff internally, and then we look to see how we can use that with customers.

So effectively you are piloting it before you roll it out.

Yes.

There are two particular areas on which the AFM is working. One is on the income protection side. We are working with Fair4All Finance to make sure that the design of income protection covers different categories. We are particularly looking at categories that are not so well served, such as the gig economy and other areas that do not fall into the classic employment categories. Secondly—this was touched on in the earlier session—we are looking at a way to provide payroll savings and set up the national coalition of employers, which AFM and others such as TISA are involved in. That has two purposes. The first is to help employers to get comfortable with what they can do within regulation, and not fall foul of regulation in offering products to their customers. The second, to make the process even less frictional for customers, is to make sure that they are designed properly.

We have been talking about the risk profiling model. In our discussion with Mr McAteer on the previous panel, we were saying that solutions are coming out of the working group about doing surveys, working groups and signposting, and it is all about building understanding and capability of individuals. But he would say that, systemically, the risk profiling model is wrong: it is never going to cover the uninsurable. He was suggesting either a system of levies within the industry or a carousel system in which you are forced to take on the people who would otherwise be uninsured. Was that a source of contention in the working group? Would you argue against those systems, or are you open-minded about either a levy or a carousel-based system?

Our sector wants people to enjoy the financial security that the products can provide, and improving financial inclusion is a priority. I believe that the sorts of model to which Mr McAteer may have been referring are sometimes referred to as an “inclusion re”. That is something that the ABI has thought about, but we believe that it raises very significant practical and policy challenges. Flood Re is often alluded to as a potential model, but the ABI was involved in the design and implementation of Flood Re back in 2014 when it was introduced in the Water Act. It is really not comparable to this model of an inclusion re.

That is the levy basis, but what about a carousel system whereby you take it in turns to take on people who would otherwise be priced out of insurance?

That is not a model that we have considered. It is often looked at in the context of motor insurance, so I do not know whether that is where Mr McAteer was focusing in his evidence session. I am aware that some frustration has been expressed by consumer representatives that motor insurance was not considered in the Government’s financial inclusion strategy. The reason for that is that the Government already had a very significant programme of work in train through its motor insurance taskforce, which reported toward the end of last year. If you look at that report, it is very clear that the Government had considered different types of intervention and cross-subsidies, but had concluded that, for motor, that simply was not going to be viable, because the nature of the risk is very different from what you would see in something like flood, which is identifiable and quite prescribed.

We will pick up on motor insurance later. What is interesting about the strategy is that only one measure in its proposed metrics is directly about insurance. Our Committee has to keep an eye on this. Do you think that it is enough? If not, what additional insurance metrics should be provided?

Our overall view on metrics is that they were probably too high-level and too generic. We have talked in a previous session about the difficulty of setting targets at this stage. That is clearly something that needs to be done. There were some areas where they were too reliant on surveys such as the FCA’s financial lives survey, which only happens every two years, so it will be difficult to chart progress. There are probably some gaps around product take-up. If the inclusion strategy works, we should be looking over the longer term. It will take a while to shift on things like the number of people who do take up protection products who do not currently have them, because that is an ultimate sign that people are building up their financial resilience. The last thing I would say is that there are some metrics relating to financial education. It was mentioned in the previous session that it is more input than output-focused. This is broader than the providers. It is so important for financial education in schools to link in with Ofsted evaluations. It is also important that the Government consider being part of the PISA financial literacy review, because that is a way of getting an international measure that can truly measure capability increase.

But that is not a proposal at the moment, so that is a suggestion for us. Finally on this point, would you have any issue with providing financial inclusion data at firm level to make sure that we can hold each firm to account? Would that be a problem for you?

No, as long as the standards are set. All firms are used to providing data, whether that is to the regulator or to others.

I understand the point about targets and KPIs. We have set a strategy with some deliverables. I understand the point about the FCA’s financial lives survey being every two years, but it is a very useful survey and will enable us to identify whether some of the outcomes have improved over the period.

I cannot speak for the individual firms, but I think in the previous session Mr Singh indicated that it really depends on what outcome is being looked for through publication of the data. Another dimension that it might be helpful for the Committee to have regard to is the focus that the Government have put on competitiveness and growth. The regulators now have that as their secondary objective. The ABI undertook analysis around the costs of regulatory compliance for the UK insurance sector very recently, to help inform the thinking towards the Government’s commitment to reduce the cost of administrative regulation by 25% by the end of this Parliament. It showed that in 2025 the UK insurance sector was paying at least £4.8 billion in regulatory compliance costs. I suggest that in considering additional data requests, we ask whether that will deliver the benefit and outcome that we are looking for in this context or whether there are other ways in which that might be achieved.

We all love data on this Committee; I guess we love it because it helps us to hold you to account. It is something that we will be watching closely.

As you identify, signposting is another important recommendation in the strategy. That builds on the existing signposting services and agreements in place across the industry. This particular workstream will be led by BIBA, which represents the brokers. BIBA already produces figures that set out how many customers have benefited from the existing signposting agreements. We are at an early stage in respect of how the total signposting commitment will be progressed, but I understand that BIBA is discussing how it can be integrated into consumer journeys, including with price comparison websites, which I think could help further.

My expectation is that BIBA will want to illustrate the effectiveness, yes.

That could potentially be a further step, once we have made progress on the initial commitment.

I was just going to build on that point and mention the FCA’s financial lives survey again, which might be one way we can get a sense of whether the number of people who are self-excluding has increased.

In the interests of time, I wonder whether each of you could come back to the Committee in writing on this: what do you think the top five drivers have been of premium price inflation for motor insurance?

You can give a quick answer now.

The main drivers of motor insurance premiums?

Yes.

Let me begin by saying that we obviously understand the challenge that motor insurance premiums pose for many households, given the cost of living pressures. That has been examined extensively by the FCA and the Government through the motor insurance taskforce. You will see from the publications of both the FCA and the Government that they have concluded that the premium price increases that were experienced in recent years were driven by claims costs. To put that into relief, in 2025 the insurance industry paid out £11.9 billion in motor insurance claims. Encouragingly, we have seen a reduction in the price of the average motor insurance premium. It is now £63 lower than a year ago, according to the ABI’s latest motor insurance premium data. That reflects concerted action by the industry to tackle some underlying drivers of claims costs, but it is also why the recommendations in the report of the Government’s taskforce are so important, because they are squarely focused on tackling those underlying drivers of claims costs. They include the availability of parts, which has been affected over recent years, for very obvious reasons, because of supply chain disruption globally. It also has to do with the availability of skilled personnel to repair the cars, which are very safe and secure but increasingly complex and costly to repair because of all the sensors and parts that now go into making vehicles. I am happy to write and set that all out, but I encourage the Committee, if you have not done so already, to read the very high-quality analysis that the FCA and the Government have undertaken, which sets it all out.

Does anyone have anything to add?

No.

I would add that I think that the work that all firms do now on all products through consumer duty, particularly looking at price and value, is really helpful, to take out certain benefits or ways of paying things and make sure that firms are not charging in any different way that does not link to their costs. That has been hugely helpful not just for this issue, but for others.

The motor taskforce says that the market is competitive and well-functioning, but is it functioning well for low-income households? According to research by Fairer Finance and Bristol University, they can end up paying almost £400 a year more. That is a significant poverty premium. Perhaps we can go to Ms Audhlam-Gardiner first.

I do not have a view on motor finance, unfortunately.

On how our pricing models work, we price based on the risk that is presented to us and the risk factors. I am not quite sure what your question is, in terms of how we are getting to that price.

I was wondering whether, more generally, the market is competitive and functioning well. Is it functioning well if the outcome is that poorer people in effect—low-income households—pay a lot more for motor insurance? Is that a good, well-functioning outcome?

Those are really public policy questions. The industry—as the FCA and the Government have found—is an effective and functioning market. The FCA study looked at pricing across different locations, because that is also a consideration. We are very alive to the fact that there is often discussion about postcodes and how location affects the pricing of premiums. What the FCA analysis found was that there is a difference in pricing by location, but that is because there are risk factors in different locations. If you are in an area that has a higher volume of traffic, and therefore a higher likelihood of collision, or if there is a higher incidence of vehicle theft, those are going to be factors that contribute to the pricing of premiums. Typically, that might be an area of quite high urban density. The measures that need to be taken to address those risk factors are as set out in the Government strategy, as well as in their recent road safety strategy, which we strongly welcomed, and measures as have recently been introduced in Northern Ireland around graduated driver licensing, which will help to improve safety for young and inexperienced motorists. All of these are important drivers of the risk, and that is ultimately what is driving the premium price. I recognise that this can be unsettling and uncomfortable for individual consumers, but these are differences that reflect the risk profiles of different areas.

Perhaps I could feed back that constituents have very recently said that the loyalty penalty, which used to be quite obvious, has slightly lessened. Would you and the panel put that down to the recent FCA intervention? What has changed in the last 12 to 18 months such that that appears to have changed?

The FCA introduced GI pricing practices reform a number of years ago, and that eliminated this—I believe the term in the industry is price walking. I think it is a combination of that, the consumer duty and the focus on fair value. Those will be some of the reasons why.

I wonder whether those steps that we went through could be lifted and dropped into some of the other discussions we have had, for example on people with mental health conditions. We have learned those things in one sector of your industry, and perhaps they can be lifted and dropped into some of the other sectors that still lack that choice for consumers.

Absolutely. The GIPP changes and the difference between new business and renewal pricing have had an impact in terms of renewal pricing. I think what you are suggesting for mental health is exactly what Hannah was describing earlier. We are going to look at—

Back in November or December.

We are going to look at what the drivers are for that and what more can be done.

I have one final point to make. The fact that you may not have to look around next year for your motor insurance as much, because it is almost the same, will reduce the burden for everybody, including the providers, won’t it? It will help the Treasury with less red tape.

Good try!

Just to push you on what the FCA said about the premium finance market study, it concluded that customers were not getting fair value. As soon as the FCA started commissioning this research, there was an impact on pricing, and you started to see firms adjust, probably because they feared there might be further action coming down the line. To Mr Grady’s point, what does it say about market competition if a regulator has to intervene to see proper price competition and customers not being overcharged?

If I have understood the question, I think you are talking about the FCA’s premium finance market study. Is that correct?

That’s what I said, yes.

That market study was published earlier this year, and it concluded that premium finance can and does offer fair value. The FCA did not consider there was a need for market-wide intervention. It found that APRs were down 4.1 percentage points since 2022 and that there were estimated savings for consumers of around £157 million per year as a result of that.

Just to be clear, I think it concluded that many customers were not getting fair value. It said it was possible that there are costs associated with introducing monthly payments, but that in many cases people were being overcharged—just to be clear.

That is not my reading of the FCA market study. It did conclude that paying monthly can involve an additional charge for the insurer, and those costs can arise from administering and managing multiple payments, the opportunity costs of missed investment, and maintaining cover for customers who fall into arrears, often for several months.

Why, then, did APRs almost immediately reduce when they started to do this investigation by 4.1 percentage points and, for the firms that were directly challenged, by 7 percentage points? It seems coincidental at least.

The ABI has been working with members on this for some time. Back in April 2024, we published premium finance principles that were intended to complement the consumer duty and fair value requirements. That is a voluntary set of principles, but it makes it clear that charges must be clearly explained and costs should be proportionate and reflective of the costs incurred by the firm. I would like to think that it is a combination of regulator engagement and voluntary commitment through the industry and the ABI to drive those outcomes.

Ms Rayner, would transparency on the costs be part of the solution—separating the cost of providing the finance from the premium costs—so that there can be proper competition between people?

We already do that. As part of any sales journey either online or by phone, we set out to the customer the different payment options—monthly; annually—and the additional cost of paying monthly. That is explained to the customer before they buy a product and sent in post-sale literature and again at renewal.

Since when has that been the case? Is it now the industry standard?

That has been the case for a very long time. I think it goes back to the regulation of general insurance in 2005.

I think most people watching would understand that you have to price risk. In previous sessions, your representatives and peers talked about how AI and machine learning are being used in pricing and underwriting, with some controls, such as human, in the loop and pricing ethics oversight. However, there remains an anxiety. We have talked about it in a number of contexts across different types of product. As you can routinely have more insights into risk through AI, machine learning and so on, you can price more reliably and inaccurately and therefore exclude people more reliably and accurately. Ms Gurga, you spoke about the problems with making comparisons with Flood Re. You would probably say the same about Pool Re, and so on. How do you address the fundamental concern that as insights from technology and in relation to society move forward, we will see more and more people excluded because the risk premium becomes unaffordable? That is the core question. How would you reassure us that the changes in the way that you price your products will not result in that outcome?

You have touched on a really important issue, but I do not think it is just about AI or technology. I joined the ABI at the start of 2022. My background is not in the insurance industry. I believe that we have to do more as an industry to gain people’s trust. We are making every effort to do that by providing greater transparency around how premiums are calculated and by working with our members to ensure that customers enjoy a good claims experience if they need to make a claim. The first and foremost act for the ABI is working with our members to build trust and confidence that the industry is pricing accurately and fairly and that we are committed to serving the communities in which we live and work. We want to be representative of those customers. We want to be more diverse as an industry so that we actively represent those consumers. That is the first principle. When it comes to the use of new technology and AI, we probably have to do a better job of explaining how we are already using it. You will be familiar with telematics—the so-called black box in motor vehicles.

To prove good behaviour.

Those are not designed to be exclusionary; they are designed to enable insurers to have confidence from the data on how people are driving that they can make the premium more affordable because they have confidence in the risk profile of the driver. A lot of benefit can be provided.

But that is proving behaviour, rather than something like a health condition. Behaviour is a choice; a health condition is not. There is a slight difference of emphasis.

Yes, there is.

The point is that it is quite obvious that you can find out more about your market and that your understanding of profitability will be enhanced. No one is saying that they expect insurance companies then to pick up an unaffordable number of people—you cannot afford to—but society needs to know who those people are and have a conversation about how we deal with that problem. Clearly, the insights you are going to gain when you do this are going to reveal that there are people who will fall under the net. The purpose of this Committee is to try to say, “How do we grip this social problem, if industry understandably can’t?” Where do we go to understand how your new ways of calculating risk reveal larger numbers of people who will unavoidably find the cost of their premiums unaffordable?

I am not aware that that is a concern, certainly when it comes to motor insurance. It has not been found through any of the analysis that has been done by the FCA or the Government. The drivers of the motor insurance premium cost are coming about because of the cost of claims, which is to do with the cost of repairing very expensive vehicles. As a country, we do not have enough skilled repair technicians. They are high-quality jobs, and I hope the Government choose to focus on them as part of their skills strategy. We understand the concern more broadly around use of technology and AI. It is a debate that we are actively engaged in, and we will be contributing to the review led by Sheldon Mills at the FCA, as it begins to explore, across financial services, what AI means for the industry in the round.

Mutuals were set up more than 200 years ago precisely to pool risk and serve groups of customers, where there was a geographic group or a particular group like police who needed to have that risk shared. We are not charities, but we also do have a long-term view. We are able to play a role in looking longer term at how we cover risk, making sure that we continue to be sustainable for the future, but at the same time, trying not to exclude people. As Stephen Noakes was saying earlier, there are different models and business models, and that does allow a greater proportion of people to be served over time.

Before we finish, I want to touch on another issue, although it is not directly related to the financial inclusion strategy. Ms Gurga, you talked earlier about how the industry has to price things accurately and fairly. In a number of our constituencies, a big issue is leasehold flats or any multiple dwelling building. Partly because of the tragedy of Grenfell, insurance premiums have gone up considerably. This is causing quite a lot of distress to people. There are other things you can control, but with the insurance industry, there is often limited choice. I have one block of flats where the managing agent could find only one insurer, with a very high premium. After some discussion, they negotiated the premium down—to still a high rate—but only for one year. Can you give us any assurance that industry will step up to try to solve this problem of uninsurability and high costs?

This is an absolutely critical issue. In the industry, we talk about it as MOBI—the multi-occupancy buildings insurance market. It was a priority for me when I joined the ABI. On day one, the first letter I wrote to the then Secretary of State said that we as an industry would do what we could to address these costs for leaseholders experiencing incredible difficulty through no fault of their own. Conversely, I talked about Flood Re. This seemed to be a case where there was a very strong argument for a public-private partnership model, because these were systemic issues that have come about because of failures in building safety regulation, and there was going to be a very long period of remediation. It was therefore in the public interest, and in the Government’s interest, to make sure that insurance could be available and affordable. At that time, however, the Government said that they were not willing to consider that, and that it needed to be an industry solution, which we worked extremely hard to deliver. In April 2024, we launched the fire safety reinsurance facility, working with McGill and Partners. That was renewed last year, at which point the cover limit was increased. We take that as a signal that that is working effectively—the cover was increased from £50 million to £75 million. Since it was launched, more than 750 buildings have been entered into the facility, representing a total sum insured of more than £17 billion. That has increased capacity within the market. That is what we as an industry can do, but when it comes to addressing the issues that leaseholders face living in these buildings with fire safety defects, it is about remediation—

But it is not just about that. Some are facing remediation, so there is understandably going to be some link between the risk and that, but some have now had that remediation done or did not have that in the first place, and are still finding it hard to get an insurer, because the insurance risk has nominally gone up. Do you have any data that you can provide us with about the crystallisation of that risk? The notional risk before Grenfell was on one criterion; post Grenfell, it was deemed to be a bigger risk, potentially. That is part of what drove up premiums. First, do you recognise that characterisation? Secondly, is it just that that drove up premiums? There are areas where there is not a great deal of fire risk, but insurance has still gone up considerably, so it is not just about cladding.

It is not just about cladding. There are a number of issues. Escape of water is another one. Quite often, if people are renovating their apartments, they might want to put in ensuite bathrooms and that type of thing. Overall, it comes down to claims costs. With respect to remediation—

Escape of water is not a new thing, though, is it?

There are more escape of water claims as a result of years of changes to people’s properties. We can certainly write to you, but I just want to come back to remediation, because this is a really important point for the industry. We, of course, support the Building Safety Act and a more robust framework having been introduced for assessing fire risk and external walls, but the current PAS 9980 guidance does not fully reflect the range of risks that insurers see on the ground. A focus on life safety is obviously paramount, but that is not sufficient when it comes to providing insurance for buildings. We have been talking to the Government about this. We would be very happy to provide further detail to you and the Committee on this point, and share further information about the fire safety reinsurance facility and the benefits that it has brought.

On escape of water, I have heard horrendous tales of people whose properties are almost uninsurable because the premium for escape of water is sometimes up to £10,000. Is that really an industry that is meeting the needs of consumers?

I think that the market is going to be looking at what the risks are for different properties. They will have different risk appetites across different models.

That is a life-changing amount of money for some people, and the insurance industry is not able to insure to a reasonable level a number of those properties. Is that not a market failure?

I do not believe that there is a market failure in that regard. I think this is reflective of the fact that, around claims costs, we have seen huge inflationary increases across multiple years as a country for various reasons. The costs of building materials and labour have gone up. This all imposes costs. My view is that the Government would do well to engage with the insurance industry at the earliest stage of policy development. Risk is our business. Unfortunately, too many policy decisions are being taken where they are not thinking through what the risk ends up meaning for the consumer. There are consequences that will ultimately be borne by the consumer, whereas I think we need to have that dialogue much earlier on. Building safety is one example; another might be around electric vehicles, where there is a Government push to encourage electric vehicle adoption, but without conversation with industry about the risk profile of electric vehicle batteries, the design—

Let’s take escape of water for a moment. In my constituency, despite lots of tower blocks being blown down back in the ‘90s, more private ones have been built since in large numbers. In one small half of one London borough, there are thousands of people who are renting leasehold properties. Some of them are quite new, and yet their insurance premiums are quite high. How could Government have predicted, when those were being built, that the insurance industry would find escape of water too risky to cover?

If they had had conversations with insurers at an early stage, they would have understood better what the sorts of risks are and the risk factors—

And then not allowed the flats to be built? What would have been the policy solution to that? I am just a bit puzzled—genuinely puzzled.

I think it is about having an open and honest conversation about what factors the insurers will be considering when they are underwriting the risk. That is what the planning requirements are and the expectations from a public policy perspective. We see this all the time. Flood Re is a great case in point. Flood Re is time-limited in legislation. It is due to conclude in 2039, and the market will be moved back to risk-reflective pricing, but that is predicated on investment in flood defence maintenance and properties not being built in floodplains, and yet we still see that there is inaction—

What policy proposal would you put forward to stop flats being built where ingress of water is one of the biggest risks? Occupants of a flat cannot control what their neighbours are doing.

That is a question that I will need to take away and come back to you on.

As it is the end of a long, hot session, perhaps we will not pursue that further. We will take that offline. I thank our witnesses very much indeed for their time: Hannah Gurga, who is the director general of the ABI, Alison Rayner, who is the chief compliance and corporate affairs officer at Allianz UK, and Nici Audhlam-Gardiner, who is both a board member of the Association of Financial Mutuals, representing mutuals today, and the CEO of Foresters Financial. The transcript of both panels will be available on the website, uncorrected, in the next couple of days. We will be producing a report in due course, so we will keep you posted on that. I thank our colleagues at Hansard for recording this and our colleagues at Bow Tie for the broadcasting.