Vulnerable Customers – The Fine Line Between Care and Caution in Claims

This article is by Sarah Durkin, Head of Counter Fraud, Woodgate & Clark

The challenge of identifying and appropriately supporting vulnerable customers during insurance claims is becoming more complex—and more urgent. With over half (51%) of UK financial services customers now classified as vulnerable, up from 44% in 2023, insurers and their claims partners face growing pressure to navigate the fine line between care and caution. The issue is not simply one of empathy—it is a matter of regulation, operational clarity, and fraud prevention.

New data has revealed a troubling rise in vulnerability drivers, particularly mental health. The number of customers with mental health conditions has nearly doubled in just one year—from 10.2% in 2023 to 19.5% in 2024.

This is not news from our perspective as a loss adjuster for the insurance sector. Around 60% of claims referred to the counter fraud team at Woodgate & Clark involve vulnerable customers – this is a huge rise in just a couple of years and mainly due to neurodiverse conditions such as ASD, ADHD and bipolar disorder.

One of the biggest challenges is that many vulnerable individuals do not recognise their own vulnerability. In one recent case, it became clear that a customer was suffering from dementia when she was visited at home as part of a claims investigation – there was no damage to repair, yet the customer insisted otherwise.

The FCA’s guidance defines a vulnerable customer as someone “especially susceptible to harm” when firms do not act with “appropriate levels of care.” That guidance, while helpful is just that – it is guidance and as such, leaves room for interpretation. Without clearer implementation tools or sector-specific protocols, insurance providers and the claims professionals they trust to support customers, risk falling short in two directions: either failing to support genuinely vulnerable individuals or being exploited by fraudulent claims disguised as vulnerability.

There is an urgent need for insurers, loss adjusters and other third parties to reach consensus on two major issues with regard to vulnerable customers, namely:

· Undisclosed vulnerabilities (such as dementia) that become apparent during the claims process and the duty of care to the policyholder if there are concerns over their welfare.

· Validating that the neurodiverse condition confirmed by a policyholder in the midst of a fraud investigation, is genuine

Vulnerability, especially when linked to mental health or communication difficulties, can sometimes resemble fraud indicators. A claimant who is evasive, confused, inconsistent, or unwilling to speak on the phone might raise flags in a standard claims process. However, these behaviours might just as easily stem from neuro diverse conditions or mental illnesses that create anxiety, cognitive impairment, or trauma as from malicious intent.

Given the sharp rise in mental health-related vulnerability, now is the right time to reassess claims-handling protocols. For example, vulnerable customers may benefit from simplified language, information delivered in stages, and the option to interact through their preferred channels (including verbal rather than written or third-party supported communication). Overwhelming a claimant with legalese or a barrage of documents can cause distress, delay resolution, and damage trust.

As a sector, there is also an urgent need to improve how vulnerability flags are recorded. It is not acceptable for customers to have to re-explain their circumstances repeatedly—an experience that can be traumatising and frustrating. In addition, we must not rely solely on customer self-reporting. Many people don’t know they are vulnerable, or may feel ashamed to admit it.

The FCA’s expectations are clear: vulnerability is not a niche issue; it affects everyone, and firms must treat it as a systemic priority. As an industry, to build long-term trust—and avoid regulatory penalties—we must agree on steps to improve training, create smarter systems, and formulate clearer, more practical guidance. In this way, we can tread the fine line between care and caution with a greater degree of confidence, knowing we are doing the right thing for our customers every step of the way.