The end of tenancy deposits? New insurance app claims to have a solution

| Marc Shoffman

A UK startup which claims to have the solution to the contentious issue of tenancy deposits has introduced the concept of tenants’ passports.

InsureStreet, an app backed by serial entrepreneur Vin Murria and insurance provider HISCOX, is pitched as an alternative to the “dead money” of tenancy deposits that would free up £4bn to go into the UK economy by replacing them with trust-based deposit replacement insurance.

Instead of paying an upfront deposit, tenants would make a one-off payment for an insurance policy from HISCOX that covers the landlord for up to £30,000 in the same way a deposit would.

Each renter is given a Rent Passport that lasts for 60 days and looks at personal information such as where they were born, their job, credit report, any sanctions as well as a negative media check to determine how much they should pay for the insurance.

The cost of insurance policy is not recoverable, as a cash deposit would be, but it can be reduced to as low as 5% based on good renter behaviour.

Tahir Farooqui, founder of InsureStreet, told EYE that premiums would be 5%-15% of a typical cash deposit cost but good behaviour would lead to a lower risk premium.

There is also a policy excess of 10% of the deposit value.

Agents, renters and landlords will all be able to rate each other on the app.

Farooqui said: “We believe change comes from within, especially in an industry that has been blighted with mistrust. In championing social mobility, we chose to lead by example and empower our customers to do the same; together we can grow and evolve as positive agents of change.

“Our goal is to make it easier for good tenants to find nice places to live – especially in large cities where rent is inflated beyond their means.

“For landlords, because they have access to trusted renter profiles, it takes away the fear and mistrust out of rental transactions.

“What we are offering is not only a convenient app to set up and access our RentPassport  service, but also a ‘Rental Hub’ to connect tenants, landlords and agents with each other and relevant services to improve their overall rental experience.”

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10 Comments

  1. jeremy1960
    May 12, 2017 at 08:09

    So, no fees, no deposit and now a “solution” that removes any commitment from the tenant whatsoever! You pays your insurance premium, pick up your passport wander around all the agents, view everything, “like” every property and then leave all the agents and landlords guessing which property you may want to take, if any! Sounds like a government policy to me, so well thought through!?

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  2. drakeco75
    May 12, 2017 at 09:47

    Wonder how easy it will be to claim on the policy?

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  3. agent111
    May 12, 2017 at 10:10

    So tenants will no longer be incentivised to look after a property to ensure they get their deposit back (only by means of getting a good rating on the app). They will instead only have to pay a smaller one off fee and 10% of the damage? Seems to be another hit for landlords. I can only assume that landlords would benefit from better protection in regards to having more money to play with for damages but damage/rent arrears will happen more often.

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  4. flatfair65
    May 12, 2017 at 11:21

    Congrats to Tahir and team, well done!

    I agree that landlords should take out insurance to cover their property, however, the nature of an insurance product is by no means an alternative to tenancy deposits.

    I’m the co-founder of flatfair and we address all concerns by Joe and others in the comments above, by offering a non-insurance based alternative. With the support of the FCA Innovation Hub, a provider of government backed dispute resolution and other industry leaders, we have developed a simple, affordable and secure alternative to tenancy deposits – the flatbond. Tenants pay a small fee upfront with no annual premium, the landlord enjoys double the protection compared to the usual deposit and the tenant stays liable for damages of up to 6 weeks, payable after the tenancy. Letting agents and landlords can offer and advise on our product and even earn a commission, without fearing any regulatory penalties like with an insurance product.

    Please get in touch if you want to learn more – info@flatfair.co.uk

    Regards,

    Team flatfair

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    1. TAHIR68
      May 13, 2017 at 12:22

      Thank you Franz.
      4 weeks ago, on your website you had claimed partnership with HISCOX, DAS, partnership with a dominant agent in London (you told me this agent has 7% of London market share) and a £1m in funding. That’s an amazing achievement. Well done.
      As regards your product structure.
      So Renter pays 1 week deposit instead of 6 weeks deposit. After paying 17% in fees to Flatfair, Renter is 100% liable for anything which goes wrong with the property? Is this right? 
      You state Landlord is offered double the protection. Typically deposits cover 6-8 weeks? Is your protection now 12 – 16 weeks? That’s amazing. Well done.

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  5. Woodentop
    May 13, 2017 at 10:46

    Someone is trying to invent a HIP for tenants. Wouldn’t touch it with a barge pole.

     

    “Our goal is to make it easier for good tenants to find nice places to live” = Translates into, I want to make money out of you.

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    1. TAHIR68
      May 13, 2017 at 11:26

      Thank you Woodentop for your comments.
      We are putting customer service at the heart of everything we do. At present, Agents can interest on Tenants hard earned cash deposists. We are going to create a fair and transparent platform in the market. It is also common practice that some landlords have made a business out of Tenants cash deposist whilst some tenants abuse Landlords property.
      At InsureStreet, we are enabling trust based transactions and have signed up leading property brands.

      We do not make fictious / erroneous partnership claims. We will also contribute a % of our profits to the homeless. I have been homeless myself so yes I say this with passion, we are on a mission to enable trust based transactions.

      Thank you

      tahir@insurestreet.co

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  6. tev43
    May 13, 2017 at 11:25

    Speaking as a many-times tenant getting the deposit back is the main incentive to get the marigolds and scrubbing brush out when you leave. It’s also a risk hanging over you the whole time (so I’d love not to pay a deposit). I don’t see why a landlord would give up this trump card. And as a tenant I would not hand over such personal data to this third party to have myself investigated and rated, then be judged for “good behaviour”. It sounds more like a sentence than a tenancy. If I got into a dispute with the landlord, she would not give me a good review – how does the insurer fairly assess my “behaviour” when it is my word against hers, especially given most disputes are not black and white?

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    1. TAHIR68
      May 13, 2017 at 11:46

      Hi Tev
      These are all great comments – thank you. There is increasing evidence that people who go to the gym 5 times are week, take their health seriously are also consistently responsbile in other domains of their life. 
      Just because we have car insurance does not mean we drive into a tree as insurance will cover it nor do we drink ourselves to death as life insurance will cover it. 
      Think about the first time Uber came to market—basically us getting into a strangers car or airbnb — us letting a stranger into our home? My point is what we are doing at InsureStreet requires a paradigm shift in the way we think. Change I beleve does not happen over night. 
      We have signed up leading property brands and are piloting to learn with them on how to build the right product. We do not claim perfectio day-1. We hope to learn and adapt based on feedback from Agents, Landlords and Renters. 
      Tahir@insurestreet.co
       

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  7. TAHIR68
    May 13, 2017 at 11:34

    Dear Joe52
    Thank you so much for taking time to provide your comments. This is very helpful. We are grateful for all the comments on this page as this will help us improve our core product – Deposit Replacement Insurance.
    Sir, do you think its fair Landlords / Agents should be earning interest on tenant deposits?
    Our RentPassport is free for Agents, Landlords and Renters. Some agents charge £65 for referencing and we do all the references for free. 
    You are absolutely right–whether its a bond (packaged as a pay day loan for poor risk candidates) or a traditional insurance product, unless the product is designed carefully and incentives aligned, it will never work.
    We are confident that we are not putting lipstick on a pig. 
    You have made great points and I would be delighted to have a 1-1 discussion with you please if you have time. My email is:
    tahir@insurestreet.co
    07887401895
     

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