Building resilient households

• Context
• The study
• Key findings
• Points to consider

Context

The Building Resilient Households Group (BRHG), established in 2016, is an informal group whose members include the Chartered Institute of Insurance, a number of insurers and reinsurers interested in income protection, and a number of independent members including its two joint-chairs. The aim of the group is to shine a light on the financial resilience of UK households and encourage action to bring about improvements.

Financial resilience is a key piece of work for the CII which is growing in importance. There’s an increasing sense of insecurity amongst UK households, as a result of recent challenges such as the pandemic and the cost-of-living crisis. The report points out recent developments, looking at the current tools used to track the state of resilience, and calls for more to be done.

The study

The study reviews current surveys and measures of financial resilience in the UK to understand to what extent the issue is a problem and to assess the effectiveness of the tools available to measure resilience. The study also includes qualitative interviews with 16 industry experts and stakeholders. It then makes recommendations for the continuation of the review into household financial security and makes and for policy level changes to improve financial resilience across the UK. The study was carried out by the Chartered Insurance Institute and sponsored by financial institutions Aviva, Legal & General, Lloyds Banking Group, LV=, Pacific Life Re, Swiss Re as well as the Chartered Insurance Institute.

Key findings

The report concludes that lack of financial resilience is a serious – and growing – problem. Recent developments in measuring resilience are very welcome and help to shed new light on the issue, however there is still a belief that an official national measure for resilience should be created.

A number of themes also emerged from the stakeholder interviews including the following:

• There was widespread agreement amongst interviewees that lack of financial resilience amongst a large swathe of the population is a serious and widespread problem in the UK.
• Participants felt that we are now reaching a turning point. The issue is becoming more prominent and if it becomes a priority for Government and regulators then significant improvements in resilience could be achieved over this period, but it will not happen by itself as too many structural factors currently act against it
• All interviewees saw the Government as having a central role to play. Local Government was also seen as having an important role – and one that could be helpfully expanded
• Specific changes that could improve resilience included:
• Promoting savings
• Promoting employment-related benefits and services
• Creating more fairness in key services
• Better financial education and inclusion
• Improving access to help for people in financial difficulty – including affordable credit
• Tackling low pay
• Reforms to State benefits and Housing policy

The report recommends the establishment of an independent Commission on Household Financial Security which can review the state of financial security in the UK and make recommendations to improve it.

Points to consider

• Methodological strengths/weaknesses: The interviews were conducted under the Chatham House Rule which means that the views expressed can’t be attributed to specific stakeholders. However this is appropriate for this type of study which is about idea generation and problem solving.
• Applicability: The report is aimed primarily at government and policy makers as it calls for improvements in measuring financial resilience and widespread social changes. It will also be of interest to financial institutions and support agencies and anyone who works with households with low financial resilience.
• Relevance: The report is highly relevant as lack financial resilience is a growing issue in the UK
• Generalisability: The report is specific to the UK working age population but the ideas around improving financial resilience may have value in other markets