Vulnerable Customers

Putting customers first makes good regulatory sense and good business sense. And we believe putting vulnerable customers first should be at the heart of any business model. By helping you understand vulnerable customers, understand the relevant risk and regulatory advice, and get actionable insights,
we hope we can help you create better services and get better outcomes.

How to define a vulnerable customer

The FCA first defined a vulnerable customer in 2015 as:

“Someone who, due to their personal circumstances, is especially susceptible to detriment, particularly when a firm is not acting with appropriate levels of care.”

It went on to identify four key drivers of vulnerability in guidance published last year, and further explained:

“Vulnerable consumers may be more likely to experience harm. In many cases, this risk of harm may not develop into actual harm. But if it does, the impact on vulnerable consumers is likely to be greater than for other consumers.”

Ultimately this is about people, and there is no tick box matrix that will encompass every permutation of personal human circumstances. It would be a red herring for insurers and brokers to fixate on a neat and tight definition.

A more helpful way to think about how to identify vulnerable customers is to look at how their circumstances affect their decision making and engagement with financial services and from there assess what care they should be afforded to ensure they do not suffer financial detriment or distress because of other life events.

Vulnerable customers may have lower understanding of financial products and the way they are sold, the benefits and mechanics of shopping around at renewal, and they may be digitally excluded. They are less likely to be engaged customers who read and react to insurance communications. Brands should consider how different vulnerabilities translate into the best way to serve customers in sales, renewals and claims processes.

“Putting customers first makes good regulatory sense and good  business sense. We believe putting vulnerable customers first should be at the heart of any insurance business model.”

Ian Hughes, CEO at Consumer Intelligence

Importance of vulnerable customers to financial institutions

Vulnerable customers may have lower understanding of financial products and the way they are sold, the benefits and mechanics of shopping around at renewal, and they may be digitally excluded. They are less likely to be engaged customers who read and react to insurance communications. Brands should consider how different vulnerabilities translate into the best way to serve customers in sales, renewals and claims processes.

Firms such as insurers and financial service providers have a responsibility to ensure that they offer appropriate support and fair treatment of what are
termed ‘vulnerable customers’. Vulnerable customers are individuals who are deemed to be more at risk of ‘detriment’ due to their personal circumstances for a range of reasons, including short-term, long-term, or permanent emotional, mental, physical, financial or social circumstances.

Whitepaper: Vulnerable customers in the age of the cost-of-living crisis

Taking steps towards putting customer vulnerability at the heart of your business

• What is a vulnerable customer?
• Our methodology in identifying vulnerability
• Insight within home and motor insurance on vulnerable customers
• Insight on how vulnerable customers behave
• How is the cost-of-living crisis impacting vulnerable customers?
• Vulnerable customers and the new Consumer Duty
• So, what should insurers do?