The FCA’s Financial Lives 2022 survey found that 47% of UK adults demonstrate at least one characteristic of financial vulnerability, with 24% having what is described as “low resilience.” This means that any kind of financial or emotional shock (such as job loss or illness) could propel them into a state of hardship.

Throw a cost-of-living crisis and record levels of inflation into the mix, and it’s only logical to expect this percentage to rise over the coming months and years.

In light of this, it’s more important than ever that the insurance industry does its part to ensure vulnerable customers are not left behind. After all, it’s these very people who are often the most in need of protection – yet least likely to be provided with appropriate levels of support.

The impact of ignoring vulnerable customers

Unfortunately, neglecting to account for the needs of vulnerable customers can have serious repercussions – both for the customer and the insurance provider.

First of all, financially vulnerable customers are at an increased risk of exploitation. For example, they may be more likely to take on unsuitable products that do not match their needs or fall victim to scams or fraud. This can have a huge impact on their finances and well-being.

From the insurer’s perspective, providers may be held liable for any losses suffered by vulnerable customers as a result of their negligence. The upcoming Consumer Duty regulatory changes from the FCA are likely to put even greater pressure on insurers to ensure their customers are adequately protected.

In a sector where reputation, trust, and public perception are fundamental, it’s no wonder that the industry is stepping up to ensure customers are given adequate protection.

Identifying vulnerable customers in the insurance sector

It’s highly unlikely that vulnerable customers will step forward and announce that they need help. It is therefore the responsibility of insurers to identify and support them. According to the FCA:

“A vulnerable customer is someone who, due to their personal circumstances, is especially susceptible to harm – particularly when a firm is not acting with appropriate levels of care.”

Some of the main characteristics that could indicate a customer is vulnerable include:

• Being in a financially precarious position
• Poor financial literacy
• Poor health
• Cognitive impairment
• Recently experience significant life events (a sudden diagnosis of serious illness)
• Particularly younger/older customers

By taking the time to assess customers and identify any potential warning signs of vulnerability, insurers can ensure they are suitably supported. This could involve providing additional advice or guidance before, during, and after the purchase of a policy, or making reasonable adjustments to ensure their needs are met.

Challenges in identifying vulnerable customers

Of course, identifying vulnerable customers is not without its challenges. Many insurers find that their legacy systems and processes are not tailored to identify vulnerability in the way they’d like – particularly when it comes to data capture and analysis.

For instance, without speech analytics, insurance providers may be forced to rely on manual processes, which can be inefficient and prone to errors.

Furthermore, some firms may be reluctant to provide vulnerable customers with additional support due to the perceived cost and effort involved. Whether it be a lack of resources or an unwillingness to adapt, this kind of attitude can be damaging – both from a customer service and regulatory compliance perspective.

Finally, staff resilience can be an issue too. Vulnerable customers may require extra care and attention, which can take a toll on employees who are not properly supported or trained. This is something we will cover in significant detail in our next blog in this series.

It’s time to take action

Now that the FCA’s Consumer Duty is looming, it’s time for the insurance sector to take action to ensure vulnerable customers are being adequately protected. While there is no denying that this is a complex issue, there are steps insurers can take to step up to this challenge. With this in mind, here is a collection of quick, actionable tips you can implement in your organisation to start protecting vulnerable customers:

Proactively look for red flags

As mentioned, vulnerable customers are unlikely to announce that they need help. Therefore, it’s important for insurers to proactively look for any potential warning signs of vulnerability, such as the characteristics listed above or any sudden changes in customer behaviour.

Open multiple communication channels

It’s essential that customers can contact their insurer quickly, easily and conveniently. Offering multiple communication channels – including telephone, online chat and email – can help to ensure that customers are able to access the support they need.

Facilitate a self-disclosure process

If customers are able to self-disclose their vulnerability, insurers can provide them with the right support quickly and efficiently. Allowing customers to disclose their vulnerability easily and discreetly – via a dedicated portal or even an app – can encourage them to come forward and access the help they need.

Implement appropriate tech solutions

Technology can play a huge role in helping insurers to identify, assess and protect vulnerable customers. Implementing solutions such as speech analytics, service by design, and customer segmentation can help to quickly identify customers who may need additional support.

Seek out partnerships with specialist organisations

It’s worth reaching out to local charities, support groups and other organisations that may be able to provide additional help. This can be particularly useful if customers are struggling with financial issues or mental health problems, as specialists can provide specialist help and advice. For example, organisations like Step Change and The Money Advice Trust can help customers to manage their finances more effectively.

Empower and upskill your workforce

Finally, it’s essential to ensure your staff have the right skills and training in order to appropriately support vulnerable customers. Implementing regular training sessions and schemes such as mentoring can help to ensure that your staff are properly equipped to support customers who may require additional help. If you would like to learn more about this, we will take a closer look into how you can improve employee resilience in our next blog in this series.

We can help

If you’re considering how to best protect your vulnerable customers, our team of experts can help you every step of the way. Not only do we have the experience, resources, and know-how to help you assess the needs of vulnerable customers, but we can also provide advice and guidance on how to implement the right solutions. Contact us today to find out more.

Doing the right thing

In a sector where reputation, trust, and public perception are fundamental components of business success, it is essential that insurance firms have strategies in place to ensure their customers – and colleagues – are looked after and supported where necessary. Not only is this a regulatory and legal obligation, but it’s simply the right thing to do.

If you want to learn more about building a resilient customer experience, we have recently published a white paper that covers the moral, legal, and commercial drivers behind creating an improved CX, as well as practical advice on how you can implement such initiatives.

Download white paper