Posted: 01 Nov. 2021 10 min. read

Vulnerable consumers

Reflecting on the challenges ahead

Last month, several reforms went live for financial services organisations including the design and distribution obligations, breach reporting, hawking prohibitions, internal dispute resolution and deferred sales model for add-on insurance products.

With all the effort to implement this amount of regulatory change, it is important not to lose sight of the ultimate purpose of these reforms – to support fairer outcomes for consumers including those who may be vulnerable. In this blog, we explore the challenges which require significant focus before organisations can holistically embed the fair treatment of vulnerable consumers in their operations.

Over the last 12 to 24 months there has been an increased focus on vulnerable consumers in the financial services sector. This is evident in the case studies from the Financial Services Royal Commission, the updated versions of industry codes of practice such as the Banking Code of Practice, General Insurance Code of Practice and Life Insurance Code of Practice (currently in draft), which set out the key industry commitments to supporting vulnerable customers, and the Australian Securities and Investments Commission (ASIC)’s supervisory priorities for 2021-25.

More recently, the financial services sector played an important role by stepping up to support consumers experiencing vulnerability to navigate their way through COVID-19 by providing temporary relief from loan repayments and altering loan characteristics. With the reforms that just went live and the increased focus on vulnerable consumers, there is an opportunity for the industry to continue the momentum of doing right by consumers and re-establish its role and trust in the community.

Taking a holistic approach

To manage the fair treatment of vulnerable consumers, it is important that organisations take a holistic, rather than siloed, approach to understanding and managing their needs. This means that consideration of vulnerable consumers should be embedded across all stages of the product lifecycle, as well as across multiple products and multiple brands, and become part of the organisation’s DNA.

Who may be a consumer experiencing vulnerability? 

The UK’s Financial Conduct Authority defines a vulnerable consumer as “someone who, due to their personal circumstances, is especially susceptible to detriment, particularly when a firm is not acting with appropriate levels of care”.1

ASIC considers this to include people experiencing specific life events or temporary difficulties (e.g. an accident, family violence or job loss) as well as personal or social characteristics that can affect a person’s ability to manage financial interactions (e.g. speaking a language other than English, or experiencing cognitive or behavioural impairments due to intellectual disability).2

Challenges to protecting and supporting consumers experiencing vulnerability    

Below, we explore three key areas of challenge which require significant focus before organisations can embed the fair treatment of vulnerable consumers in its culture and end-to-end operations.

1. Defining the organisation's role and aspiration around vulnerability

A question that organisations must answer is: How far do we go to support our vulnerable consumers?

The answer may well depend on the nature and scale of the organisation as well as its customer base, particularly the types and drivers of vulnerability. While regulations and industry codes set out minimum standards, to meaningfully support vulnerable consumers organisations should clearly understand the needs of those consumers and define the support they are willing and able to provide to meet those needs.

For example:

  • Should support be limited to existing consumers, or extend to potential consumers?
  • Should support be reactive (e.g. help consumers when they contact the organisation), proactive (e.g. use data to identify and resolve systemic issues impacting consumers), or both?
  • Should support be limited to financial assistance, or should non-financial assistance be provided (e.g. provide financial counselling services/referral to other support services)? 

2. Frontline staff skills and capability

Vulnerable consumers are more likely to experience poor outcomes when staff do not have the skills and capability to:

  • understand or recognise indicators of vulnerability;
  • sensitively respond to the consumer; or
  • appropriately consider and address the consumer’s needs.

Given frontline staff are often the first to interact with consumers, organisations should ensure they have been trained and possess the skills and capabilities to meet the needs of vulnerable consumers. This could be a challenge given the day-to-day pressure on the frontline to perform their roles, particularly in the current COVID-19 environment where there is a spike in consumers requiring support. Training and solutions should therefore be simple and easy to access or remember, and not take much time out of their daily role. In some instances, frontline staff must be able to identify when a consumer is experiencing vulnerability and have access to specialist teams so that the consumer is more appropriately supported.

3. Balancing the need for flexibility with the need to standardise process to drive compliance and efficiencies  

Vulnerability can be experienced at various stages of the customer journey from product design and distribution to customer servicing (e.g. complaints) to cancellation/exit. Given the breadth of when vulnerability can be experienced, having fair and flexible processes at all stages is important to allow for tailored support that meets the needs of vulnerable consumers.

The challenge here is balancing the need for flexibility with the need to standardise process to drive compliance and efficiencies. Examples of areas where flexibility is particularly important include: 

  • Complaints handling: requiring staff to follow highly structured processes and not allowing for room to respond to non-standard problems could result in unfair outcomes. For example, not being able to take more time to respond to a vulnerable consumer’s complaint with “extra care” may exacerbate their situation.
  • Requiring proof of vulnerability: certain procedural requirements could administratively burden and potentially exclude vulnerable consumers from obtaining the help they need. For example, requiring them to fill out forms, provide acknowledgements and show evidence of their vulnerable circumstances (e.g. police report and intervention order) may place a large burden on them and lead to disengagement with the organisation.

Watch this space!

Over the next few months, we will explore ways in which organisations can pragmatically overcome these challenges and set themselves up so that vulnerable consumers are treated fairly. 

In the meantime, feel free to contact us if you want to learn more about our solutions and the support we can provide.

[1] Financial Conduct Authority, Guidance for firms on the fair treatment of vulnerable customers, February 2021 at page 3.

[2] ASIC Commissioner, Sean Hughes, in a speech to the Financial Services Assurance Forum, ASIC’s expectations for protecting vulnerable customers, 26 November 2020. 

Get in Touch

Rosalyn Teskey

Rosalyn Teskey

Partner, Audit & Assurance

Rosalyn is a partner in Deloitte's Melbourne office in the Governance, Regulation and Conduct practice. She specialises in supporting firms to design and assess frameworks to treat customers fairly, including the development of conduct, product governance, sales practices and complaints handling frameworks. Rosalyn co-leads our Accountability practice and leads Deloitte’s Design and Distribution and product governance offering.

Josephine Tan

Josephine Tan

Director, Audit & Assurance

Josephine is a Director in the Governance, Regulatory and Conduct practice based in Melbourne. She specialises in supporting businesses manage operational risk and compliance across the end-to-end product lifecycle and customer journey. Josephine also helps businesses navigate the complex regulatory environment by providing pragmatic advice and sustainable solutions. Her key focus is to promote preventative conduct and positive customer outcomes within the financial services sector.

More about the authors

Kavir Kalian

Kavir Kalian

Senior Manager, Audit & Assurance

Kavir is a Senior Manager in Deloitte’s Governance, Regulation and Conduct Practice. He specialises in supporting banking, insurance, superannuation and wealth management clients navigate through regulatory change, with a focus on designing and implementing conduct frameworks.

Sharmila Lakshman

Sharmila Lakshman

Manager, Audit & Assurance

Sharmila is a Manager in the Governance, Regulation and Conduct practice based in Sydney. She is a lawyer and has experience supporting clients predominately in the financial services sector in governance and accountability, regulatory compliance, product design and distribution, and customer advocacy. Sharmila is focused on delivering simple and innovative solutions to clients that promote preventative conduct and good customer outcomes.

Holly Webb

Holly Webb

Senior Analyst, Audit & Assurance

Holly is a Senior Analyst in the Governance, Regulation and Conduct practice based in Sydney. She specialises in supporting clients across the insurance sector with dispute resolution and focusses on preventative conduct and promoting good customer outcomes.