Taking the heat out of financial vulnerability

Learning key lessons from the government's approach

Taking the heat out of financial vulnerability


By Matthew Connell

As temperatures rocketed towards breaking records to become the hottest day in British history, the UK government spelled out what mercury hitting 40C could mean for individuals.

Guidance was issued about suitable actions everyone could take to protect themselves from the risks created by the period of extremely hot weather.

Dr Agostinho Sousa, head of extreme events and health protection at the UK Health Security Agency, said: “It’s important we all know how to stay well in hot weather. Check up on vulnerable friends, family, and neighbours to make sure they stay hydrated, keep cool and know how to keep their homes cool.”

Why am I talking about temperatures? Have I succumbed to heat stroke? Well, I am sharing Dr Sousa’s wise words because there are lessons to learn from the advisory approach taken by the government to managing the risk to health presented by the hot weather.

The government, policymakers and regulators expect the profession to know what action is needed to protect everyone’s financial wellbeing, but when it comes to those in vulnerable circumstances, they expect insurers to go beyond sharing information or signposting.

The Financial Conduct Authority’s view of vulnerability is as a spectrum of risk – one that it expects professionals to understand, be able to spot and step in to offer suitable assistance to address.

All customers are at risk of becoming vulnerable, but the FCA states this risk is increased by having characteristics of vulnerability.

These could be poor health, such as cognitive impairment, life events such as new caring responsibilities, low resilience to cope with financial or emotional shocks and low capability, such as poor literacy or numeracy skills.

To achieve good outcomes for customers in vulnerable circumstances, the regulator states insurance professionals should:

  • Understand the needs of their target market/customer base.
  • Make sure staff have the right skills and capability to recognise and respond to the needs of vulnerable customers.
  • Respond to customer needs throughout product design, flexible customer service provision and communications.
  • Monitor and assess whether they are meeting and responding to the needs of customers with characteristics of vulnerability and make improvements where this is not happening.

To me, just as the government made it clear how it was everyone’s duty to check-in on the vulnerable during the heatwave, the regulator is making it clear it is part of the profession’s duty to consumers to check-in on those in vulnerable circumstances when the economy is overheating.

Just as the nation got hot and bothered by the weather, the Financial Conduct Authority was preparing to publish its Consumer Duty on July 27.

The regulator has been clear that the level of care that is appropriate for customers who have characteristics of vulnerability may be different from that provided to others, and firms should take particular care to make sure they are treated fairly and in a way that meets the individual needs of those customers.

Focusing on these areas will help firms prepare for the Consumer Duty. A key part of the Consumer Duty will be a requirement for firms to: 

  • Put good consumer outcomes at the centre of their businesses.
  • Be able to demonstrate those outcomes are being met.
  • Focus on the diverse needs of their customers at every stage of the customer journey.

Back in June, the Insurance and Financial Services All Party Parliamentary group held a roundtable on consumer vulnerability in June and this focussed on the greater need for resilience post-COVID.

The group heard about opportunities for financial services to contribute to the government’s strategy of ‘social prescribing’, in which building financial resilience becomes part of the toolkit of public-sector services such as health.

To be part of the government’s solution, I would recommend checking up on customers in vulnerable circumstances, making sure they have the information they need to improve their financial resilience so that they can keep their cool whether the weather is roasting or whether we are entering a winter of discontent.

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