A new report from the Building Resilient Households Group (BRHG) – a body supported by the Chartered Insurance Institute Group – has found that almost a third of adults in the UK could not currently meet an unexpected bill of £850. The report, which uses data from the Office of National Statistics, describes this crisis in financial resilience as ‘a cause of misery, instability and unfulfilled potential for millions of our citizens’.
It quotes further striking statistics from the Financial Conduct Authority, showing the number of people lacking financial resilience has risen significantly in recent years, with the January 2023 figure demonstrating that almost 19 million people are not coping financially. That is a huge percentage of the adult population.
The data is interesting for insurers for two primary reasons. One, it indicates that there is a natural ceiling to the amount you can charge for car insurance before people simply stop buying it.
Secondly the general level of financial distress is linked to increasing levels of fraud, or attempted crimes like theft, fraud, staged claims etc. Stable societies offer progress in both material betterment and general obedience of the local laws. But factors like price inflation, lack of career routes out of poverty and isolation all act as drivers of lawlessness. In short, people stop trying to play by the rules; they see it, they want it, they take it.
The divide between those in the UK who see work as an inherently “good” thing, or at least a personal responsibility, and those who regard work as being pointless and prefer UBI or benefits, is also growing. We have around nine million economically inactive adults in the UK, according to the ONS. They estimate another 320,000 or so will join this pool by 2026. This also eats away at the social contract which underpins civilsed society, it also leads to national bankruptcy as the “free” money inevitably runs out.
Dr Matthew Connell, Director for Policy and Public Affairs at the PFS, said: “This report shows that the resilience challenge strikes at the heart of the contract between individuals and society – hard work should be rewarded with security, but too many are falling through the net. There is an urgent need for a commission to set out the issues and potential solutions, in the same way that the Pensions Commission did in the 2000s.”