The CII's Underwriting Faculty New Generation Group has looked at the issue of vulnerable customers, and its new report makes a number of key recommendations to help insurers develop market-leading solutions, as Ant Gould reports
The Financial Conduct Authority and the Financial Ombudsman Service (FOS) have identified the issue of vulnerable customers as one the insurance profession needs to address -- but it also makes sound business sense. A new report from the Chartered Insurance Institute's (CII) Underwriting Faculty New Generation Group, titled Consumer Vulnerability -- How well is insurance responding?, points out that from a purely financial perspective, vulnerable consumers represent a significant amount of gross written premium (GWP), by the sheer numbers of people that can be considered vulnerable.
Disabled individuals represent 19% of the UK workforce. If only 10% require home insurance, at an average of £250 per policy, that is a market segment of £172.5m. And 25% of people are estimated to have mental health issues; the number of those expected to have cancer is more than one in three. Translate these into GWP and these are large sections of the marketplace that cannot be ignored. The positive treatment of vulnerable individuals will also help bolster the overall reputation of insurance.
The full report goes into great detail on each of the seven recommendations (see box), with a number of insightful case studies from both within and outside of insurance -- with a strong message running throughout the report that there is no need to reinvent the wheel where good practices already exist. Supporting its recommendation for an industry-wide framework for identifying and recording vulnerability, the group observes that the Direct Marketing Association has already produced guidelines for call centres dealing with vulnerable consumers. In this, it makes recommendations for signs that may suggest a consumer is potentially vulnerable.
These guidelines, says the group, could easily be transferred to front-line insurance employees. That said, the report also recognises that a lot of insurance is now transacted without any human interaction, which makes the identification of vulnerability more difficult. In a lot of cases, the only interaction with the insurer will be at the claims stage, where it may be later than ideal to identify the vulnerability. This should still be recorded on the policy however, so that the policyholder is protected in future interactions.
Training is also needed to reassess the vulnerability of customers. The marker should not be left indefinitely on the system, as some vulnerabilities are transient -- such as bereavement. It is important therefore that there is a regular review of any policies where vulnerability is identified.
Continuing the theme of learning from others, the report remarks that several financial institutions have already developed successful partnerships with charities, to further their understanding of the difficulties faced by vulnerable consumers. Barclays Bank for example, in collaboration with the Carers Trust, has introduced Carers' Forums in various branches around the UK.
This brings together organisations and charities from local communities to help with issues individuals might not be aware of if they are helping a family member or friend as a carer. This includes where to go for support and the options available to help with money matters. Carers Trust also co-wrote a booklet for Barclays employees, to help them to identify carers within their
branches and signpost them to where support might be available.
A lot of FOS decisions mention that a vulnerable policyholder may need special arrangements at the time of the claim. For example, on a household policy they may need a different type of temporary accommodation in the case of pregnancy or disability. Similarly, the unoccupancy terms on a household policy may need to be reviewed due to hospital admittance for an elderly policyholder. Someone with a mental illness such as depression or anxiety is likely to suffer an increase in their symptoms during times of stress brought on by their claim, so extra consideration may be needed.
For someone who is physically disabled, a car accident that renders their vehicle off the road may require a specially adapted courtesy car while theirs is being fixed. If this cannot be provided then alternative arrangements will need to be made.
One recommendation is that policyholders should be made aware of the ability to add an authorised person to their policy, who can transact business on their behalf. Insurance employees need training in the implications of power of attorney and authorised individuals.
A process needs to be established so that boundaries are clear for all parties. Implementation of a bereavement process would also be beneficial to both the insurer and the individual. A taskforce headed by Britain's biggest banks is now working out how to set up a service so that grieving families can cancel a loved one's accounts in a single step.
The report proposes the establishment of a generic, industry-wide, computer-based training programme to cover what front-line employees should be looking for in order to identify vulnerable individuals, and questions that can be asked given certain indicators -- as well as active listening to consumers' situations and needs.
Employees also need to be made aware of the limitations of the covers offered by their company, so that they can ensure the cover is appropriate for a vulnerable individual who may have specific requirements. If the company cannot offer an appropriate product, then the employee should be able to provide details of other companies who can.
The Association of British Insurers launched a code last year to support potentially vulnerable motor and household customers at renewal, which states that employees should be adequately trained to recognise potentially vulnerable customers at renewal, listen to their particular needs and be equipped with flexible options to address those needs. This, states the report, should be rolled out across all customer interactions including new business and claims.
In the final analysis, the report's message is that insurers and brokers need to actively recognise that vulnerable customers could, and will, be a growing proportion of their existing and future customers.
It adds that addressing this will have financial and reputational benefits, while there is also much to be learned from other service industries, and from speaking to customers and the charity partners that represent them.
Rahul Gumber, ACII Chartered Insurer, Aviva, Kate Handley, ACII Chartered Insurer, Allianz, Chris Smart, DipCII, Ageas, Victoria Smith, DipCII, HSB Engineering and Jenny Wakelin, ACII Chartered Insurer, NFU Mutual
The full report is available at: www. cii.co.uk
- Vulnerability should be sensitively recorded on a customer's profile if flagged by any of the customer's interactions with the insurer and be regularly reviewed for relevance.
- Charities should be consulted and in some cases partnered with in all aspects, from product development and underwriting, to claims handling and training.
- Signposting customers to more suitable insurance services should occur if an insurer believes they cannot provide the adequate assistance.
- Insurance companies should ensure support is offered to a vulnerable customer so they can effectively interact and insurers can deliver on their promised service.
- Specific training should be mandatory -- there are currently many available learning modules and programmes that have been developed by charities and organisations that can be used.
- Insurance companies should mimic successful initiatives developed outside of the industry -- in particular, utilities firms which have gone a long way to formalising their approach.
- Existing guidelines have been developed by companies and industry bodies -- insurers should read, use and adopt them.