Over recent years, regulators such as the FCA, Ofgem, Ofwat and Ofcom have placed significant focus on protecting vulnerable customers from risks that they might be exposed to. The Covid-19 crisis had a material effect on the number of these customers, and the severity of their vulnerability. Organisations must rethink their approach to this rapidly increasing customer segment to avoid potential brand and regulatory damage, to win customer trust and loyalty, and ultimately to come out the other side stronger than before. It’s the ultimate test for organisations to prove they are there for their vulnerable customers when they need them most.
With over one quarter of the UK’s workforce already on furlough, and a predicted doubling of unemployment by spring, the impact of Covid-19 will be more protracted than initially anticipated. The number of people impacted and the knock-on effects over the coming years will be significant. As a consequence, the number of vulnerable customers on the books of financial services companies, utilities and telcos are on the rise.
Based on the Financial Lives 2017 study across the four key drivers of vulnerability (Health, Life events, Resilience and Capability), organisations may find that between 1%-17% of customers exhibit one or more vulnerable characteristics, with potentially 0.4% of all customers experiencing characteristics across all four key drivers. This data is based on a representative sample of UK adults, and some organisations may reasonably see a much higher proportion of vulnerable customers. It’s not unrealistic to expect this number to increase significantly under the current circumstances.
Firms need to consider now how they will service and support these customer segments – today, and over the longer term, when their own operations may be even more disrupted, potentially becoming financially vulnerable themselves.
Baringa has supported many organisations across all sectors with shaping their vulnerable customer strategies and operating models. We have also worked with regulators and industry bodies to help shape policy and supervisory activity. The feedback we have had over the past weeks is that extra vigilance and responsiveness to the changing needs and behaviours of customers are of key concern.
The following points are suggestions for how to tackle the challenge, and outline what organisations should consider now:
Identifying vulnerable customers
Covid-19 has brought unprecedented unemployment levels, reduced incomes, made accessing critical services harder for many, and resulted in surges in physical and mental illness and loss of life - almost everyone will have or is potentially exposed to some form of life changing event. Some of these changes may be localised and short-lived, others will be experiencing the after-effects for years to come. How is your firm (re)considering who is identified as vulnerable in the current circumstances?
Many of your customers will have to make major decisions relating to mortgages, pensions, investments or insurance at a time when their decision making capacity may be constrained. How is your firm demonstrating that it is putting the best interests of customers first?
Click here for more information on vulnerable customers.
Changes to products and services
In an attempt to limit the financial exposure from certain products (e.g. loans, credit cards, store cards, insurance products), we have seen firms amending their terms and conditions, withdraw products and services or ‘price out’ certain market segments. How is your firm ensuring it is not compounding adverse circumstances currently experienced by vulnerable customers?
High proportions of your customers are facing financial hardship that will impact their ability to pay outstanding debt. This will require organisations to reconsider their approach to debt collection; especially where essential services are concerned. How does your organisation demonstrate that it has adjusted its standard operating procedures to accommodate the ‘new normal’ where vulnerable customers are even more at risk?
Click here for more information on how insurers and lenders manage the conduct risk tightrope.
The impact on communication channels
Many customer service teams are struggling with capacity-constraints and overwhelmed staff. High stress levels and untrained or ill-informed colleagues that are parachuted in to help manage demand lead to an increased risk that needs of vulnerable customers are not met. How is your organisation accommodating the need to recognise customer vulnerabilities in these circumstances?
With dispersed or reduced workforces and firms attempting to reduce the volume of inbound calls, how are you ensuring that vulnerable customers are not put off from calling or prevented from getting through?
A surge in Covid-19 related scams have emerged which naturally target vulnerable customers. How are you amending or adjusting your customer communications to ensure that customers recognise your communications as legitimate?
Click here for an article on ‘Bringing down call centre demand when customers need you more than ever’.
Managing operational continuity and controls
As firms try to react quickly, BCP / Op resilience plans may be poorly articulated, new measures may not be well trained out, and there may be new staff members speaking to customers - many of them will be remote. How do you ensure that the quality of engagement with vulnerable customers is maintained and that controls are operating effectively?
There may be a valid, lawful basis for capturing information regarding customers and their circumstances which identify them as vulnerable, and hence require special treatment. Given the Data Protection Act and requirements for processing special categories of data (e.g. health), how does your organisation ensure that accurate information on vulnerable customers is maintained only for as long as it is needed and with appropriate security controls?
Managing customer demand is key and many organisations are seeing unprecedented levels of demand and / or support required from customers. How do you prioritise those with additional needs and ensure that you are being proportionate and pragmatic with the finite resources currently available in your organisation?
Click here for more information on how to successfully manage remote operations.
Regulation & Remediation
Maintaining BAU operations during this time has typically resulted in transformation, remediation and enhancement programmes being halted or pushed out. How do you ensure that proactive customer remediation exercises continue to be prioritised – especially where customers may be more reliant on rectification or redress outcomes than normal?
Regulatory guidance to industries has focussed on ensuring firms have prioritised the needs of customers –in some circumstances at the expense of the organisation’s own financial interests. How will your organisation evidence, if challenged by the regulator, that you treated customers fairly and provided sufficient levels of support?
We have observed some industries implementing extraordinary measures across the board to consider the interest of customers, and in particular vulnerable customers, such as:
rapidly responding to customer demands and needs
temporarily suspending elements of product features
maintaining specific triage or concierge services for those with additional needs, where expert advice and guidance can be provided in addition to new interaction / engagement channels
being more overt to capture those with additional support needs (similar to a priority service register)
Post-crisis, organisations will need to assess the levels of conduct they have achieved during the crisis and consider which of the initiatives should be implemented / enhanced as part of permanent operations.
In the coming months, how many of your customers will be saying “You were there for me when I needed you most”?
Baringa has extensive experience working with clients and regulators to design and implement effective operational processes and controls to assist in the management and protection of vulnerable customers.
For further details on our capabilities and experience please contact Vanessa Clark and Daniel Golding.