FCA Expectations on Vulnerability

The FCA has recently provided guidance for firms during the current coronavirus pandemic. The regulator expects firms to consider the needs of their customers and show flexibility in their treatment of customers.

For example, the FCA would expect firms to communicate any policy exclusions that may impact the cover and use of individual policies. Bear in mind that a broker’s job is not done at new sale stage, this applies to changes either mid-term or at renewal and must clearly meet the customers’ demands and needs.

What is vulnerability?

A typical explanation would be that a customer has an impaired capacity to make an informed and reasoned decision. But does this go far enough?

Is vulnerability always a permanent state, or could it be a transient one? What about those suffering with illness or loss? It could be argued that their capacity for reasoned decision making has been impaired, albeit temporarily.

Whilst elderly customers or those with mental health problems may be described as vulnerable, it could equally be said that a young person who is inexperienced financially may also be vulnerable, as they may not fully understand the long-term implications of what they are signing up for.

Furthermore, if vulnerability is having an impaired capacity to make an informed and reasoned decision, then what impact does this have on customers making a claim? The event that has caused them to make the claim may have been extremely distressing; add to that the fact that they now have to deal with the claims process, possibly for the first time, all of which can cause additional distress and further impair the decision-making process.

During the current pandemic, many consumers may use their home address as their main work location and the FCA would not expect insurers to reject claims because of a customer’s understandable temporary change.

The importance of identifying vulnerable customers

Every insurance broker needs to be aware of vulnerable customers and how to identify them.

Whilst this is more prevalent for those brokers dealing in personal lines, it is entirely feasible that every firm will encounter vulnerable customers at some point.

With that in mind, can you confidently say that every customer facing member of staff fully understands this topic, why it is important, and how to identify vulnerability?

TCF & Vulnerable Customers

Whilst this topic is firmly on the agenda of the regulator, it is not solely a regulatory issue. Identifying vulnerable customers is, quite simply, the right thing to do to demonstrate your commitment to your customers.  It will give a better understanding of your customer’s individual circumstances (TCF), and is good business practice.

Firms do have a legal and regulatory responsibility regarding vulnerable customers, but more importantly they have an ethical responsibility to them.

The principle of treating customers fairly should be embedded within the culture of your firm.

As a regulated firm, you must establish and implement clear, effective, appropriate policies and procedures for the fair treatment of customers who you know or suspect are vulnerable.

Identifying Vulnerability

All front-line colleagues must be suitably trained to recognise and identify vulnerability to ensure that when a customer divulges a situation or condition that they may deem them to be vulnerable.

Signs to look out for (this is not an exhaustive list):

  • Long silences – may indicate a lack of understanding
  • The presence of a helper or a carer
  • Shortness of breath – may be a sign of anxiety
  • Mention of medication or an illness
  • Slurred speech
  • Incoherent responses
  • Repeatedly asking for clarification
  • Responding without conviction and authority

Firms must make every effort to identify and support vulnerable customers who might have mental capacity or financial literacy problems, which can include, for example, customers with foreign language limitations.

What should you do?

When encountering vulnerability, firms should assist customers to help them understand their products so they can make an informed decision.

This should include:

  • Establishing how the customer requires you to communicate with them
  • Allowing customers adequate time to weigh up the information and explanations provided
  • A clear explanation of any risks

Make the customer journey as easy and as simple as possible. This also applies when a claim arises. If you have identified a customer as being vulnerable make sure, if a claim arises, that the process follows the relevant points above.

Key considerations

Being ‘vulnerable’ is a state that practically every person will experience at some point during their lives. The coronavirus outbreak is likely to increase incidences of vulnerability, and exacerbate existing cases.

It is the duty of every firm to ensure that their staff can identify this state, and provide suitable levels of customer service, which extol the principles of good TCF practices.

Defining vulnerability is not a straightforward process, a ‘box ticking’ exercise, or a prescriptive workflow. Each situation will be different, and will require a solid understanding of the topic, along with a sound grasp of TCF principles, empathy, and communication skills to name a few.

For more information on this topic, please contact the team at RWA, or, if you benefit from access to the Aviva Development Zone, I encourage you to attempt our modules on vulnerable customers.

Kirk Ford
Deputy Head of Compliance


This article by Kirk Ford was originally published in Insurance Age on 1 June 2017: https://www.insuranceage.co.uk/insurer/3058356/insurance-cares-how-to-identify-vulnerable-customers. This has been amended to reflect the coronavirus pandemic and the potential increase in vulnerability.

About the author

Kirk joined RWA in 2015, having worked in the financial services sector for many years. He started out in both the general insurance and mortgage advice arms of HSBC, before becoming the Compliance Officer at Go Compare and Training & Competence Manager at Optimum Credit. 

At RWA, Kirk is Deputy Head of Compliance. He supports RWA clients by looking after their compliance, training and competence needs and keeping them up to date with regulatory changes. He promotes the achievement of fair customer outcomes and specialises in designing and implementing T&C schemes for firms of all sizes.

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