Collective Insurance For International Students

In the UK foreign students are very important, and in some cases critical, to universities’ intellectual strengths and financial solvency. An early 2012 meeting of the Professional and Business Services Group (PBSG) discussed the importance of foreign students, in terms of talent and funding, to UK universities and the potential damage that would be done if a UK university became insolvent or was unable to admit students. Such a scenario was raised by members of London Higher, an association of Higher Education Institutions (HEI). In such a scenario, foreign students, particularly those at the beginning of their studies, would have to bear a large financial loss without much hope of compensation. Closure of a UK university would affect the perceived creditworthiness and marketability of all. Given foreign perceptions, there would be significant damage to the brand of UK higher education as a whole. Although not suggesting this may happen in the short term, the potential risk already affects decisions by foreign students on whether to study in the UK.


A potential solution to this is to offer insurance to international students for their placement and, if placement is not possible, their fees. Such a collective insurance scheme would mimic ABTA’s (Association of British Travel Agents) Common Fund (1965) and Retailer’s Fund (1972) which repatriates stranded holidaymakers, refunds deposits, or provides alternative holidays, as well as the Air Travel Organisers’ Licensing financial protection scheme for holidaymakers’ air travel. Universities would make contributions to a mutual assurance fund which would provide collective insurance to international students in the event that a university cannot meet its contractual obligations for study in the UK due to insolvency or visa difficulties. In the case of a university going bankrupt, foreign students would be able to have fees refunded or be provided with funding for a suitable replacement course. The urgency for this is that UK universities currently have a good level of surpluses and cash and would generally be considered financially robust. The costs would currently be quite low.

Likewise there is competition and an example. Australia has a student fee guarantee scheme which applies to overseas students only. It requires providers to pay into an assurance fund and to be part of a 'tuition assurance scheme', which ensures that students are provided with suitable alternative courses, or have their course monies refunded, if the provider cannot provide the course(s) that the student has paid for. See:

The Australian system is required by legislation. HEFCE is unlikely to introduce such a scheme because it is a ‘light touch’ regulator focused on a ‘level playing field’. If the sector believes that such a scheme would be helpful then it probably needs to be a mutual or collective scheme. PBSG has raised this issue with BIS. London Higher members raised this issue with a Member of PBSG, Professor Michael Mainelli, Chief Executive of Z/Yen, who has in turn raised this issue with UMAL (the university mutual insurer for some of them) but it is unlikely that HEIs or UMAL will act without some sign of commitment from government. PBSG proposed a feasibility study to see whether the UK could adapt the Australian model for the UK and what would be the critical mass needed to float this scheme as a collective or mutual scheme.

Next Steps

This note is designed to initiate conversation. Z/Yen is interested in exploring these issues further with any interested party. Please contact Michael Mainelli, Director, Z/Yen Group Limited, [Note: this proposal was posted 20 March 2012, i.e. before the publicised problems between the UK Borders Agency and some universities].