In this Opinion piece, Martin Ellingham, business leader, Aptean Respond, asks whether the issue of customer vulnerability has the potential to become the next consumer mis-selling scandal in the UK. With new FCA rules on identifying vulnerable customers now in force, and companies having a clear duty of care towards them, there is a need to raise awareness across the insurance industry.
As we’re all aware, PPI represents the largest consumer mis-selling scandal this country has seen. UK lenders collectively expect PPI to cost them close to £50 billion in total, having already paid out over £48 billion in compensation and admin by June 2019. But what now the PPI claims deadline has passed? We can be certain that the massive claims management industry that sprung out of the PPI scandal, a industry that currently employs in the region of 20,000 people, won’t be going anywhere any time soon, but it does mean that the Claims Management Companies (CMCs) will be actively seeking new targets, something that financial services businesses are extremely aware of.
One potential issue for CMCs to pursue, and a much-discussed topic at the moment, is that of customer vulnerability, in particular how financial services businesses are ensuring the appropriate levels of not only service but care for vulnerable customers. Such is its importance, that the FCA has made it one of the central themes of its business plan for 2019/20. Underpinning this focus by the FCA is the idea that firms aren’t taking vulnerability seriously enough. However, as yet, outside of their own best practice framework, there are no set guidelines for businesses to follow when it comes to dealing with vulnerable customers.
Although vulnerability as a whole can be hard to define, harder to legislate for, and even harder still to identify, many financial services businesses are taking the opportunity to review their current processes. Aside from instilling best practice across the business, for many, it’s an attempt to pre-empt any regulatory requirements that the FCA could well introduce, not to mention helping to build a robust defence should the CMCs try to pursue vulnerability as their next source of income.
A challenging task
The main challenge faced by financial services businesses is identifying vulnerable customers in the first instance. For example, in the case of a disability, not all disabilities are obvious. Also, it may be that customers don’t realise they’re vulnerable, or even if they do, they’re loath to self-identify. Others may be experiencing transient vulnerability, perhaps as a result of a major life event or upheaval, something that hasn’t been evident before and won’t continue to render them vulnerable in the future, but for the here and now, is a real issue for that individual.
Not only does this make it hard for businesses to spot vulnerable customers, but it makes it nigh-on impossible to regulate for it, such is the scope and the scale of the whole ‘vulnerable’ label.
Another hurdle to cross is to ensure staff have the training and tools necessary to help to identify vulnerable customers, as well as empowering them to do the right thing once vulnerable customers have been identified. On the whole, front-line staff are younger people, with not as much life experience as their older counterparts, perhaps making it more difficult to empathise with customers for whom major life events or circumstances have caused them to be vulnerable. It’s difficult to train for that but with greater clarity on what makes a customer vulnerable, from the regulator and the business itself, it’s certainly not impossible for staff to increase their awareness and understanding.
Aside from increasing employee ability to recognise vulnerability, a vital part of the equation is to empower these very same staff to take the necessary action that vulnerable customers require. This might be by way of a triage-type process, where those identified as vulnerable are passed on to a special unit that’s empowered to deal specifically with vulnerable customers. Or, again, through training, it’s possible to give employees the option to side-step the rules or standard Ts&Cs when needed, not only giving them the adequate time needed to consider what needs to be done differently, but furnishing them with the knowledge needed to know how to do things differently.
The role of technology
Even if you have the most empowered employees in the industry, the crux of the issue is still successfully and accurately identifying vulnerable customers. Training is good but ultimately it still relies on people to apply things learnt in training to everyday situations, something that doesn’t always translate, and something that still risks people falling through the gaps. Technological developments are in the pipeline though, with consumer vulnerability detection systems incorporated into customer experience software or a case management platform able to detect patterns in customer language to flag up potentially vulnerable customers. It’s not a case of trying to take control and responsibility away from employees, but more a concerted effort to ensure the obvious signs aren’t missed.
However, even this isn’t watertight. Humans aren’t always right and it’s certainly very helpful to increase automation with technology wherever possible but you still need an element of quality assurance on top. To date, it’s this quality assurance that’s led to best practice development within a good number of financial services businesses, with the opportunity to reassess and review historical cases leading the business to realise that actually, certain policies are unfair or unreasonably applied. This benefit of hindsight has triggered many to make the necessary changes to proactively help not only vulnerable customers but the entire customer base, too.
Do I think customer vulnerability will be the next PPI? No, I don’t. It’s not as black-and-white as PPI and such is the breadth and scope of potential vulnerabilities, not only is it impossible to cover all bases from a responsible business point-of-view, but even the regulators are so far unsure how to regulate on it. If any direct enforcement action is to be taken by the regulator, what’s needed is greater clarity on how vulnerable customers are defined, not to mention how they should be treated. As much as CMCs are trying to find a new hook, customer vulnerability isn’t it. (Maybe it’s unreasonable MTA policy charges when people change jobs or move house? – Ed)
What it does represent is a real opportunity for financial services businesses to raise standards in the industry, applying sound principles to every customer interaction, treating every customer in accordance with their particular needs, and constantly reviewing their own processes to ensure the appropriate levels of service and care for vulnerable customers. I’m sure that regulators will continue to regulate as they understand it better but so far, financial services organisations themselves are taking the issue of customer vulnerability very seriously, driving best practice, raising the bar and setting the standards required for responsible business practices for today and the foreseeable future.
For more information on how Aptean Respond can help drive best practice within your business, contact Respond@aptean.co.uk