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Introducing the Rainy Day Exposed: One of Six Newly-Discovered Segments of People at Risk in the UK

London, 16 December 2008 – “Exposed?”, a new report focusing on risks to financial security from the Personal Finance Research Centre, University of Bristol, reveals how risks cluster together in ways that leave people extremely exposed to the worst consequences of the economic downturn.

The independent report, which has been supported by Genworth Financial, the global financial security company uses an innovative technique known as latent class analysis to identify how a range of common risks co-exist, using data from the FSA’s Baseline Survey of Financial Capability.

The 11 risk factors, range from being poor at choosing financial products, being an impulsive spender, having low savings or inadequate provision for retirement, through to having no contents insurance or other protection insurance.  By considering the characteristics of those exposed to multiple forms of risk in different combinations, it was possible to build six fascinating socio-demographic profiles that should help to identify trigger points and threats to people in these difficult times.

The findings reveal that: 

• Very few people made sure they were well protected when times were good – in fact just four per cent faced none of the 11 risks.
• Around 12% of people, mostly with dependent children, left themselves chronically ill-prepared.  They typically had no savings, no contents or life insurance, no pension and neither income nor payment protection insurance.  On average, this group faced 5 of the eleven risk factors studied – the highest of the six segments.
• Another nine per cent also had attitudes to spending and borrowing that left them highly exposed.   In addition to a lack of savings or insurance, most had low levels of financial capability, high levels of borrowing and a tendency to spend on impulse.  These, largely younger households will be most at risk during the economic downturn.
• The largest group of people were rainy day exposed, and it is precisely these people that have been discussed so much in the current economic climate. They tended to hold little or no liquid assets, relying instead on housing equity or borrowing. Any savings they had were held as more risky investments rather than savings accounts.  And whilst they had insured against a loss of income and had some pension provision they are very likely to find it more difficult to meet unexpected expenses now that house prices are falling and credit is becoming more difficult to access.   This group represents 31 percent of the UK population.
• The other three segments were: relatively secure, future uncertainty and inherently at risk and unprotected.

 

“This is a more holistic study than one that focuses on wealth, insurance or borrowing, said David Lane, regional manager for Western Europe at Genworth Financial’s Lifestyle Protection business.  Through this detailed analysis of exposure to financial risk, the industry, regulators and policymakers can develop the solutions needed by UK consumers – whether they be new ways to protect against income shock, basic product, savings incentives or carefully designed financial capability initiatives”.

"It is striking that so many households are not only exposed to financial risk, but are exposed in a number of ways”, said Professor Elaine Kempson, director of the Personal Finance Research Centre, University of Bristol.  “Sadly, many of these people and their families will now be beginning to suffer from their exposure to these risks, particularly where they relate to a lack of protection against expenditure and income shocks”.

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Genworth Financial, Inc. (NYSE:GNW) is a leading public Fortune 500 global financial security company. Genworth has more than $100 billion in assets and employs approximately 7,000 people in 25 countries. Its products and services help meet the investment, protection, retirement and lifestyle needs of over 15 million customers. Genworth operates through three segments: Retirement and Protection, International and U.S. Mortgage Insurance. Its products and services are offered through financial intermediaries, advisors, independent distributors and sales specialists. Genworth Financial, which traces its roots back to 1871, became a public company in 2004 and is headquartered in Richmond, Virginia. For more information, visit genworth.com.
The Personal Finance Research Centre is an independent research centre that specialises in social research across all areas of personal finance, mainly from the consumer's perspective. Much of our work focuses on the following areas: financial exclusion and inclusion, credit use and over-indebtedness, financial capability and financial decision-making, money management and savings. Our team has expertise in designing, undertaking and analysing both large-scale quantitative and in-depth qualitative research. We conduct research for a wide range of organisations, including government departments, trade associations, charities and the private sector. We combine extensive empirical research skills with a detailed understanding of a range of social policy issues. Our work has been influential in shaping public policy, and we provide technical and policy advice to government departments and others.

 

Media contacts:

Genworth Financial

Guy Genney, Tel. +44 208 380 3786, guy.genney@genworth.com

The authors of the report are available for interview on request.  Please contact Guy Genney for full copies of the report.