Assuring good outcomes for vulnerable customers

Assuring good outcomes for vulnerable customers

In our latest series of articles ‘Gearing up for the downturn’ we explore how financial services firms are preparing to help their customers achieve good outcomes through a recession. This fourth article looks at vulnerable customers.

The latest FCA financial lives survey (June 2022) indicates that 47% of UK adults show characteristics of vulnerability, due to poor health, life events, low financial resilience, or low capability. Vulnerable customers are those who are more susceptible to harm and may require an extra level of care to achieve good outcomes. The rising cost of living may mean that more adults find themselves in a vulnerable position, and those who are already vulnerable maybe susceptible to greater levels of harm. The Consumer Duty also heightens the responsibility on firms to take an extra level of care with customers who are suffering from one or more characteristics of vulnerability.
 

Identifying vulnerability

Customer vulnerability is a complex phenomenon. It can be driven by poor health, life events, low financial resilience, and low capability. These drivers can occur at any stage and can happen unexpectedly. Customers are often not unaware that they are vulnerable, with as many as 67% (FCA, 2022) not realising that they are suffering. And signs of vulnerability may not always present themselves in day-to-day interactions.

Firms need to define what vulnerability means to their target customers, to the products and services they provide and their operating models - creating definitions, policies, and procedures for identifying vulnerability.

With customer vulnerability being complex and often hard to detect, firms need to be alert. Customer journeys need to be analysed to expose where good outcomes for vulnerable customer may be compromised. Where vulnerable customers may be marginalised, product and service design needs to be addressed.

Demographic or transactional data monitoring might be used to indicate potential vulnerability. Data-based models can be refined over time to get better at detecting customers who might need a greater level of care.

Customer facing staff also need to be enabled to identify vulnerability.
 

How to enable staff to identify vulnerable customers

To identify vulnerable customers, staff need to be capable, have the right tools and be empowered.

Building staff capability involves high quality training. Customer agents need to be able to spot subtle signs and have attuned listening and questioning skills to reveal where customers maybe having difficulty. Empathy, maturity, and sensitivity are also important traits to build for dealing with vulnerable customers. As well as the right training, staff need to be equipped with the right scripts and decision-making tools to guide them and help make critical judgements. It is also fundamental that staff are allowed the time take extra care and supported when handling what can be emotionally demanding cases. This means the right culture and day-to-day management.
 

How does product and service design vulnerable customers?

Once the firm has determined where customer vulnerability may present, and how they will identify it, they then need to determine how they will treat these customers who may be susceptible to harm.

Products and services need to be designed so that vulnerable customers get good value. This does not mean designing specific products and services but ensuring that should a customer be vulnerable they can achieve the same outcomes as other customers. This includes the forbearance measures have been factored for customers who become vulnerable.

Firms also need to ensure that communications and distribution channels enable vulnerable customer to easily access products and services.

It is also important for firms to ensure that suitability and affordability checks are appropriate for customers who are vulnerable and assess for potential future vulnerability. As well as safeguarding the customers interests, this also protects the firm from the risk of remediation.
 

Are you testing for good outcomes?

Even with a carefully designed operating model, firms need to be checking that vulnerable customers are achieving good outcomes. A robust and well implemented outcome testing framework will provide assurance that firms are doing the right thing, and also expose any failings so that they can be improved. Testing needs to include sufficient vulnerable customer cases, compared against other customer groups. The outputs from outcome testing need to shared with the board and across the three lines of defence to ensure that action is taken in the right area of the organisation.