How Resilient is addressing this critical component of consumer financial health
Consumer financial health continues to be a growing concern in the U.S. With reportedly 57% of American adults struggling financially, the issue is consistently covered in major media outlets, and has been driving innovations in products and services for financial technology, financial services, insurance, and other industries.
The attention on consumer financial health is promising; presumably it will usher in a new era of financially healthy Americans. But the attention has been incomplete by focusing on some aspects of the issue and not others. Specifically, the importance of supporting consumer financial resilience is a critical part of financial health which has been lacking in the conversation.
One of Resilient’s aims is to shine a light on why financial resilience is critical, and how innovators can help consumers build resilience.
The conversation around consumer financial health
As defined by the Center for Financial Services Innovation (CFSI), consumer financial health is achieved “when an individual’s day-to-day financial system functions well and increases the likelihood of financial resilience and opportunity.”
Much has been written about, and many innovations are addressing how “an individual’s day-to-day financial system functions” in regards to savings, credit, and payments. The focus on day-to-day functions has been largely on “access”, i.e. how to better provide access to underserved communities with affordable products in savings, checking, credit, investing, retirement, etc.
But we believe the latter condition of financial health has not received its due attention: financial resilience.
Innovations have not done much to provide underserved communities with access to resilience, i.e. the services and products that help consumers withstand financial ups and downs so they can build financial health in the long-term.
Resilient, however, believes innovations that encourage consumer financial resilience are key to building overall financial health in the U.S. The Resilient model for providing insurance protections for low- to moderate-income (LMI) households offers significant opportunity to help underserved consumers weather financial changes and achieve long-term financial health.
Resilience: The largely ignored component of financial health
Helping consumers meet their financial needs on a day-to-day or month-to-month basis is vital, of course. But if their needs for the long-term future are vulnerable to a sudden change in their job, personal or financial situation, then their lives remain in a precarious and financially unhealthy state.
Financial resilience means that consumers can weather financial changes and resist the potentially devastating impacts of financial shocks. Otherwise, slight shifts in income or unexpected expenses can condemn LMI households to a state of perpetual financial struggle and uncertainty. And if they borrow in order to deal with financial changes, they often become trapped in a cycle of long-term debt.
As the CFSI definition alludes to, financial resilience and opportunity go hand-in-hand. The Resilient model of delivering insurance protections enables consumers to build their financial resilience and thereby open up new opportunities for a better financial future through improved financial planning, investing, growth.
Insurance as a tool for resilience
In their survey report “Insuring the Way to a Financially Resilient America”, June 2018, CFSI reports that “Insurance is a unique tool that can support individuals when they face disruptive life events… such as major home repairs, income lost to unemployment, a pay cut, illness, injury, and death.”
That may be good news, but the Insurance Information Institute reports that 40% of adult Americans don’t have life insurance, 80 percent don’t have disability insurance, and 59 percent of renters don’t have renter’s insurance. Millions of Americans are uninsured or underinsured against familial or spousal death. Swiss Re estimates this “mortality protection gap” is upwards of $25 trillion in the U.S., averaging on a household basis about 45% of income replacement needs.
The lack of affordable and relevant insurance products may be one reason why only 13% of the more than 4,000 respondents to CFSI survey reported that they had relied, at least somewhat, on benefits from insurance when facing financial challenges.
Although some of the financial challenges faced by those surveyed may not have been insurable, the numbers of un- or underinsured individuals clearly indicate that American households are not being provided access to affordable and relevant insurance products that support their financial resilience.
There is a need to provide that access, because as CFSI states, “Insurance is a critical tool that provides protection, even in the absence of any savings cushion.”
Resilient: An insurance model supporting consumer financial resilience
Resilient has developed an Inclusive Insurance model that provides insurance protections for consumers on a reward basis, offering insurance in exchange for behaviors they already engage in.
The model is adaptable to multiple verticals, including fintech, retail, and any industry employing 1099, independent contractors. The model’s flexibility hinges on companies or employers predetermining specific behaviors (e.g. fintech platform engagement or mobile phone contract renewals) or units of work (e.g. number hours worked ) which advance corporate objectives. When consumers engage in those behavior or fulfill the units of work, they receive insurance protection at no cost and at significant discounts
Inclusive Insurance gives consumers greater access to insurance protections. If they are already full or part-time independent contractors, or if they engage in consumer behaviors with companies offering Inclusive Insurance, they immediately gain access to products that support their financial resilience against disruptive life events or financial shocks.
United Taxi Management and resilience
New York City taxi drivers are a case study in financial uncertainty. As rideshare companies have disrupted the industry, taxi drivers have suffered the effects, pushing some to the extreme of taking their own lives. The financial challenges and duress of NYC taxi driver has been covered recently in The New York Times, New York Post, and Wired.
In response, one of New York City’s largest taxi garages, United Taxi Management (UTM) partnered with Resilient to launch an Inclusive Insurance program for its drivers for several reasons, including: to be more competitive in the market for quality drivers, to better support drivers financially, and to help their drivers gain the financial tools they need to outlast financial ups and downs in the industry.
Drivers receive access to insurance protections for themselves and their families for each month they fulfill driving thresholds.
They receive free discounts on dental, vision and pharmacy cost, up to 50% of their billable value for 12 shifts completed. When they complete 24 shifts, they receive the discounts, as well as $25,000 in guaranteed-issue term life and $25,000 accidental death and dismemberment insurance, both of which are key protections to support resilience.
A new model to support consumer financial resilience
The UTM program is the first large-scale program in the U.S. to provide inclusive insurance to independent contractors.
But UTM is just the beginning for the Resilient Inclusive Insurance model. As the Inclusive Insurance model has been successfully deployed outside the U.S. by multinational companies such as Tencent and Ant Financial , the need in the U.S. is ready for innovation.
Resilient is leading the charge to provide Inclusive Insurance to the underserved and provide access to the tools to build consumer financial resilience.
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Learn how Resilient’s Inclusive Insurance programs can benefit your business. Visit imresilient.co, and contact us as Maximilian.Weiner@imresilient.co.
