The 1 January 2016 saw the introduction of a new code, jointly published by the ABI & BIBA to support potentially vulnerable customers. A 12 month period has been given for insurers and brokers to prepare for commitments made under the code.
The voluntary code sets out good practices for our industry ensuring that vulnerable customers are treated fairly and do not suffer disadvantage due to vulnerability.
The definition of vulnerability may differ from business to business however the code sets out risk factors which may lead to vulnerability – these include:
- Low literacy, numeracy and financial capability skills
- Physical disability
- Severe or long-term illness
- Mental health problems
- Being ‘older old’ for example over 80, although this is not absolute (may be associated with cognitive or dexterity impairment, sensory impairments such as hearing or sight, onset of ill-health, not being comfortable with new technology)
- Change in circumstances (e.g. job loss, bereavement, divorce)
- Lack of English language skills
Vulnerability could have an impact on the customer in a number of ways:
- A reduced understanding of alternative products or providers;
- Perceptions of barriers to exit from their existing provider (whether real or perceived);
- A reduced access to the market or an ability to shop around;
- A reduced ability to compare products or a lack of understanding of their features and how they may impact on the customer
- An increased ‘trust’ in the product and premium offered by their current insurer or broker
In order to show your commitment to the code and prevent the above risk factors you should consider the following practices:
- Staff should be able to recognise and understand potential vulnerable customers and listen to their particular needs.
- Business processes should be reviewed to ensure that products and premiums offered to potential vulnerable customers are fair and reasonable.
- Pricing and promotional practices should take into consideration the characteristics associated with vulnerability to prevent unfair and misleading customer outcomes.
- Review legacy products to ensure the product continues to meet the needs of the vulnerable customer and making them aware of alternative products which maybe more suitable.
Particular attention should be given to all renewal communication:
- Ask the customer if the current policy and renewal offer meets their ongoing needs.
- Consider all renewal communication options including additional communication by letter, email, telephone or text.
- Communication should be clear, setting out the customer’s options at renewal and what steps they need to take in order to renew or amend their policy.
- Do not encourage the customer to do nothing at renewal as this may discourage active engagement in the renewal process and decision.
- If the premium has changed explain to the customer the factors which may have affected the premium. It’s also important to point out that the customer can contact the Broker to ensure the product is still suitable for their needs.