With 26% of the adult population now claiming to be vulnerable there is real concern that they could be taken advantage of by Financial Services companies who could profiteer from their difficulties warns Ian Hughes, CEO of researchers Consumer Intelligence. The stats will be of interest to insurers and brokers, who need to be careful when managing payment plans, writing off bad debts and dealing with claims.
The number of Brits who identify as vulnerable customers has doubled in a year as the coronavirus crisis sent concerns about health and personal finances rocketing, according to new research from data insight specialist Consumer Intelligence.
The FCA defines a vulnerable customer as someone who due to their circumstances is “susceptible to detriment, particularly when a firm is not acting with appropriate levels of care.”
Key drivers of vulnerability include health factors, life events, capability or skill levels, and financial and emotional resilience – and coronavirus has clearly pushed more people to and over the edge into vulnerability.
The FCA warned last week that Coronavirus could exacerbate, or suddenly cause, vulnerability in many ways as it unveiled a package of measures it is considering to provide insurance customers with temporary support.
In a nationally representative survey, some 26% of consumers said they fitted the Financial Conduct Authority’s definition of vulnerability in 2020, when interviewed in March this year, compared to just 13% in March 2019. Over the last six weeks, the number of people identifying as vulnerable has averaged out to 25%.
In the last two weeks, more than 6 million people have been furloughed in the UK, and potentially hundreds and thousands more have lost work and income, with small businesses and the self-employed particularly affected.
The research shows that those who self-identify as vulnerable have higher levels of concern than non-vulnerable customers, with 36% very worried about their family’s physical health, 26% about their own mental health and 1-in-4 very worried about being able to afford necessary outgoings.
The findings are contained in Consumer Intelligence’s vulnerable customer report, which primarily focuses on the home and motor insurance markets, which has been launched this week in collaboration with Sicsic Advisory.
Levels of concern
The findings raise a number of concerns for financial services companies to address around understanding how vulnerability impacts consumer behaviour and what actions they should take to ensure they do not suffer a detriment as a result of coronavirus.
Consumer Intelligence CEO Ian Hughes says: “Stressed, worried, and distracted people – especially those under financial pressure – think very differently about insurance, interact differently with insurance companies, shop differently and claim differently.”
The research also revealed that vulnerable customers are more likely to automatically believe what an insurance company tells them – heightening the potential for harm if a company does not communicate with transparency.
Ian adds: “Understanding behaviour and supporting the needs of those customers is vital – but not enough. Financial services companies must act now to make sure they aren’t contributing to the detriment vulnerable people are experiencing through their interactions, or negligence. They need the protection of banks and insurers more than ever, and to know that they are getting the right information at the right time, the right products, and the right price.”
Michael Sicsic, managing director of Sicsic Advisory says: “The FCA will take a keen interest in how financial services companies can demonstrate their understanding and support of vulnerable customers, both during the coronavirus crisis and beyond. Now is the time for companies to start finding their vulnerable customers and start taking positive action.
“This is a crucial moment for banks and insurers to develop their relationship with customers beyond purchase and renewal touchpoints. Those doing the right thing now will reap the rewards in customer loyalty and brand equity further down the line.”