Putting vulnerable customer guidance into practice
Recently, the FCA published new guidance on how it expects insurers and brokers to protect vulnerable customers, one of its key areas of focus this year.
While some good work is recognised – particularly insurers’ responses to Covid-19 – the report also makes it clear that others are failing to act fast or far enough. Certainly, the pandemic is changing the game, and raising the bar.
Overall, the FCA believes that leaves room for improvement and greater consistency.
As many firms have discovered at their cost, when the FCA issues guidance, it is not optional. Rather, it is clarification on how the core rules on treating customers fairly should be interpreted.
Crucially, it is no longer enough to be aware of the indicators of vulnerability. Focus must move from causes, to impact, to action. If you understand that your vulnerable customers will not engage, you need to do something about engagement. If you understand your customers are not comfortable with traditional conversations, you need to do something about communication.
What’s more, you need to do it now.
For brokers, the main considerations will be how a product is sold and the communications between initial sale and renewal.
The challenge now for insurers and brokers is to translate the key themes identified in the report – recognising vulnerability, sympathy, knowledgeable staff and good communications – into measurable, actionable, deliverable processes that will last well beyond Covid-19.
From our recent report on vulnerable customers with Consumer Intelligence, we know the number of people who identify as vulnerable has doubled in a year, with coronavirus impacting people’s finances, health, and resilience.
That’s hardly new news. But it matters for insurance brands.
Understanding the impact on customers will help you understand and even predict behaviour. That’s the first and biggest step in being able to recognise these customers, and then being able to respond to them appropriately.
Mining your own data
You already know more about vulnerable customers than you think you do. Vulnerable customers, for instance, are substantially more likely to want to talk on the phone than interact online. They will not engage in proactive communication. They are also more prone to passive auto-renewal. This should not be confused with loyalty – these are behavioural markers that should raise questions of how your renewal process should be adapted.
The FCA also states it will apply a “vulnerability lens” to other supervisory and policy work. With the publication of its general insurance pricing practices market study imminent, this is a particularly pertinent warning for brokers which have an above average market share of vulnerable customers on their books.
GDPR legislation was introduced to protect customers from unknowingly letting firms obtain and use a myriad of personal information. However, its implementation has also often had the effect of putting more distance between a firm and its customers when trying to identify and assess vulnerability Firms, therefore, need to review whether their GDPR implementation has unnecessarily inhibited their ability to collect, store and use information which is of benefit to their customers should they be or become vulnerable
Much of the information used to assess risk can also help assess vulnerability. Age, location, payment preference, contact history – all of these can help build a picture of vulnerability and put markers into firms’ systems to track and work with affected customers.
In our experience, firms struggle most with design and organisation change necessary to identify, track and use the most relevant customer information.
Call handlers need specialist training, and their targets and wider service level agreements must be flexible to allow longer phone calls which encourage sensitive exploration of customer needs when they meet vulnerability criteria.
Soft skills are more important than ever and should be prioritised alongside traditional sales skills. Meanwhile, relevant data on vulnerability must be systematically collected and recorded so it can be used by frontline staff.
Communications to these customers will also need to be tailored – with different trigger points and different wording according to circumstances. Specialist teams or departments may need to be set up to remove these customers from normal business as usual interactions.
All of this will need to be scoped and resourced, and in many instances, it will mean a significant change in culture – from a mindset of selling towards customers support. As with a pricing structure which can cause detriment to a vulnerable customer– something forthcoming FCA guidance may address – a firm’s interactions with its customers can also cause detriment.
Understanding, knowledge and power
The report shows how personal interactions have a significant impact on how vulnerable customers feel, and in turn how they respond. As well as recognising them, staff need to be able to take time to talk and build rapport in order to fully understand a situation.
The more information a customer shares, the better able the organisation is able to respond, and mitigate the impacts of a customer’s degree of vulnerability. Once they have the information, frontline staff also need to know what routes of support are available and have a sufficient mandate to act on them.
Vulnerable customers, in particular, should not be left on call hold or lengthy queues, or passed between several departments. Action might take the form of a direct response – for instance a delayed payment or suspension of a deceased relative’s policy – or a rapid referral to a specialist team. In some cases, the vulnerable customer could be directed to external support resources. All this requires targeted relevant training and processes to be in place.
Firms which are most effective in dealing with vulnerable customers often deploy outbound teams to proactively contact vulnerable or potentially vulnerable customers at the point of renewal to ensure they have got the right information to make a well-informed decision about their insurance.
Firms need to make the effort to communicate information in a way which is appropriate to the range of vulnerable customers and their abilities to make good decisions. Presenting product and policy information in a way customers can understand, and using a tone that is seen as more supportive than dictatorial, can help produce an outcome which is in the overall interests of both the consumer and firm.
The form of automated responses by firms should be reviewed, in the light of the FCA guidance, and make sure the entire customer journey consistently supports the need of the vulnerable. Too often communications after the point of purchase do not receive as much attention as those relating to sales and therefore run the risk of not remaining consistent or fit for purpose.
The biggest hurdle for firms can be knowing where to start. We suggest the best place is with the data the firm already holds on its customers and perform a gap analysis between that and what is needed to assess potential vulnerability across all the dimensions set out in the FCA guidance.
Firms which grasp the initiative early, as we have seen through the pandemic, are likely to enhance the sustainability of their business models by improving genuine customer loyalty and therefore retention. Staff will also feel more motivated by working for a firm which treats the vulnerable with greater care and attention. Demonstration of this will also reap rewards in terms of reduced adverse regulatory attention and a stronger brand value.