"Without a top-down view, which quantifies how prevalent different types of vulnerability is within a customer base, it’s difficult for firms to create informed strategic plans that will meet the needs of vulnerable customers."
- Martin Grimwood, Consumer Duty Consultancy Lead at FWD Research
In partnership with FWD Research, the Chartered Insurance Institute (CII) has surveyed members directly involved in board reporting, discussing the challenges they’d encountered producing the first Consumer Duty reports – such as finding, reconciling or generating data.
Published in a white paper titled ‘Consumer Duty Board reporting’, the CII has set out recommendations and discussion points to support firms’ compliance with the Financial Conduct Authority’s (FCA) Consumer Duty. “In line with principles-based regulation, the FCA has chosen not to be prescriptive about what should be included in any report, leaving it to businesses to select the information they wish to rely on to achieve the desired outcomes,” the CII highlighted in its executive summary.
All regulated firms are required to produce an annual board report recording their progress in achieving good customer outcomes – as set out in the Consumer Duty. The first reports were due by the 31st July 2024.
Worryingly, the CII found that many survey respondents would benefit from assistance to better understand the characteristics of vulnerability and identify vulnerable customers. Some CII members said they’d also appreciate advice on storing & sharing information on these customers, given the need to meet other legislative requirements, such as GDPR rules.
Although some firms were concerned about how much time was being invested in the reporting process, others said it’d helped to shape internal conversations that have already driven positive change for customers. Overall, most firms said they would welcome more guidance from the FCA on how they should meet reporting requirements.
Key discussion points the CII intends to discuss with the wider sector include how well the Consumer Duty is serving the customers originally considered to be in scope and whether any changes are required as a result, how the industry can collectively support firms to understand the characteristics of vulnerability, whether it can support the production of more guidance and interpretations of the Consumer Duty, and whether it can support the introduction of a core set of metrics against which all firms should be expected to report as a minimum.
The CII is set to introduce solutions to help mortgage lenders & brokers meet Consumer Duty requirements. The first initiative, in collaboration with FWD Research, will focus on top-down customer surveys to better understand vulnerability and develop strategic plans.
“It’s clear that many firms have yet to understand vulnerability amongst their customers. Without a top-down view, which quantifies how prevalent different types of vulnerability are within a customer base, it’s difficult for firms to create informed strategic plans that will meet the needs of vulnerable customers,” explained Martin Grimwood, Consumer Duty Consultancy Lead at FWD Research.
“We’re delighted that the CII has chosen to endorse our approach to understanding vulnerability and look forward to helping CII members implement this key requirement of Consumer Duty & Vulnerability Guidance,” he added.
Responding to the CII survey, Andrew Gething, Managing Director at MorganAsh, said this research highlights the “clear skills and knowledge gaps that still exist across Financial Services when it comes to managing customer vulnerability. It also confirms that understanding of customer vulnerability.”
He stressed: “The FCA has made no secret that this is an onerous task for firms, hence why it has long advocated for greater adoption of technology to help relieve this burden, but also to improve understanding and improve the quality of data firms have at their disposal.
“Robust data is essential in meeting the requirements, yet many firms are still unsure how to secure this. The most effective & efficient way to understand vulnerability is to engage with consumers directly. Crucially though, this has to be done through consistent assessment to generate the quality of data needed to be able to communicate consistently, measure the outcomes they receive, and properly report on the findings.
“Rather than setting unrealistic ambitions for firms to train staff on how to spot every single type or trait of vulnerability, and how to deal with the hundreds of types of support organisations available, firms can be far more efficient by utilising this new technology. With the right systems in place, the true competitive advantage of Consumer Duty can be realised,” Andrew concluded.
