Rebecca recently joined us in 2024 as a Senior Content Writer and has experience researching and creating multimedia content. With a keen interest in current and emerging industry affairs, Rebecca responds through a critical lens and, by promoting thought and discussion, aims to increase awareness of UKGI’s work.
Supporting Victims of Economic/Financial Abuse
The FCA recently published a blog written by Joanna Legg, FCA Head of Consumer Policy & Outcomes, calling for more collaboration across the financial services sector in improving the outcomes of victims of domestic and financial abuse. This article looks at the ways in which the insurance industry could play an important part in detecting abuse, providing support to victims, and securing better consumer outcomes.
What is economic/financial abuse?
Financial abuse is a widespread issue. One in six women in the UK have experienced financial abuse in a current or former relationship. Although women are statistically more likely to be subject to this kind of abuse, it is indiscriminate, affecting all genders, races, and classes. Overall, 9 million people- equivalent to the population of London- have been subject to coercion, exploitation, or sabotage of their finance by an intimate partner.
Economic or financial abuse is defined as “any behaviour that has a substantial adverse effect on an individual’s ability to (a) acquire, use or maintain money or other property or (b) obtain goods and services”. In the context of insurance, it involves manipulating products or services to assert control over another, damage their finances, or leave them without, or with irreparably damaged, property or assets.
Examples include, an abuser exploiting insurance policies and procedures to deny the victim access to information, policy cancellation, interference with claims, stealing or withholding the victim’s payouts, or using a joint life insurance policy as a threat. Whilst insurance is sought to offer protection, assurance and financial security, abusers can wield it as a tool of oppression and control. Victims could also find protection less accessible or more expensive if they have a claim history due to damage inflicted on a property or asset by their abuser, or if damage is inflicted by an abuser who is also a joint policy holder.
What Has Economic Abuse got to do with the Financial Services Sector?
Given that economic abuse can frustrate a victim’s financial objectives, result in significant financial and emotional harm and poor outcomes, it is a risk that firms should consider in relation to fulfilling their obligations under the Consumer Duty. This is emphasised by Legg in the FCA blog, who notes that, looking through the lens of the Duty, the regulator “encourage[s] firms to be alert to the possibility of coercion and financial control to reduce foreseeable harm”.
The FCA’s Guidance on the treatment of customers in vulnerable circumstances cites domestic abuse (The Domestic Abuse Act 2021 explicitly includes economic abuse under domestic abuse) as a life event which drives vulnerability and highlights the use of financial services by abusers to harm victims and distinct lack of control a victim may have over their finances. To ensure customers in vulnerable circumstances are treated fairly and receive outcomes as good as those experienced by other customers, economic abuse is therefore a significant aspect of vulnerability that firms should consider.
However, as Legg points out, “survivors of […] abuse are more likely to reach out to family, friends, or their bank for help as a first step, before they consider reporting to the police”. So, she asserts, “the financial services sector has a vital role to play in spotting the signs and offering support where they suspect financial abuse is happening”.
Beyond their regulatory requirements, as an insurer is more approachable to victims than the police, but also has an influence over a customer’s protection and financial security, a firms’ awareness, and response to instances where abuse is suspected or disclosed could have a vital influence on outcomes experienced by victims and the support, they receive next.
What can be done?
Legg underscores the regulator’s wish for more collaboration across the financial services sector to develop ways to protect the outcomes of victims and ensure they “experience better and more consistent treatment from their financial services providers”.
Below are some of the measures firms within the insurance sector could take to protect customers and their outcomes:
- Ensure sensitive information which could endanger the victim is not disclosed to the perpetrator (e.g. new contact details or address)
- Devise firm escalation policies and procedures where concerns are identified, or disclosures are made by a customer regarding economic abuse.
- Use smart data recording and robust communication to ensure victim’s circumstances, or any disclosures or suspected abuse, are recorded so that victims do not have to repeat distressing details/reexplain numerous times.
- Explore how harm can be reduced where abusers could use insurance to perpetrate abuse. E.g. review customer journeys, products, and services to assess how abuser could exploit them to cause harm.
- Ensure there are opportunities available outside of automated processes which allow customers to contact staff directly, ensuring discretion, sensitivity and personal support.
- Provide training which allows staff to recognise the signs of abuse and handle communications with sensitivity.
- Work with support organisations/charities.
- Refer victims to the correct support services/organisations.
Whereas the insurance sector, its products, and services, are designed to offer financial stability, assurance, and protection, economic abuse subverts this function, manipulating it to erode a victim’s financial stability, access to information, protection, and independence whilst inflicting emotional distress.
The FCAs blog signals that the FCA may look to extend support for victims and continue to review good practice by firms to determine how the sector could better safeguard customers and their outcomes, fulfil the cultural aims of the Consumer Duty, and ensure vulnerable customers can benefit from the same outcomes as those received by other customers. The insurance sector is well-versed in risk, consumer protection, and are bastions of the nation’s wealth; therefore, this industry is in a strong place to take the lead in combatting the effects of this form of abuse within the financial services.