New data from the MorganAsh Resilience System (MARS) reveals how key sectors are performing against FCA benchmarks for vulnerable customers, with firms using digital customer vulnerability management reporting a higher proportion of vulnerable customers than those using initial manual methods.
Based on three years of vulnerable customer data, the findings from MorganAsh show that the mean proportion of vulnerable customers across its MARS digital vulnerability management platform is 50% - in line with the FCA’s established benchmark.
Breaking down the data, mortgage firms using MARS report that 36% of their customers are vulnerable, while advice firms report 42%. Mortgage firms report a smaller proportion of very vulnerable customers – at 13% – compared to 22% for advice firms. The higher proportion reported by advice firms is largely linked to differences in customer age profiles across the two sectors.
Meanwhile, the insurance sector – whose customer base more closely reflects the general population – reports 48% of customers in vulnerable circumstances.
The sector with the highest proportion is unsurprisingly the debt sector with 99% of customers in vulnerable circumstances, even excluding financial vulnerability measures. MorganAsh explains that it is high-scoring sectors such as this that contribute to the 50% proportion of vulnerable customers recorded by MARS.
MorganAsh recommends that while the 50% headline figure from the Financial Lives Survey is useful, it is better to benchmark by age and sector when comparing with peers.
Following the completion of a vulnerability assessment, MARS generates an objective Resilience Rating – much like a credit score, but for customers’ vulnerability. The rating uses 10 increments to describe consumers between very vulnerable and very resilient. This top-level indication is backed by detailed and consistent vulnerability data and can be shared across the distribution chain in compliance with GDPR.
Andrew Gething, managing director of MorganAsh, said: “With most firms reporting a proportion of vulnerable customers close to the FCA’s benchmarks, it really calls into question those firms that still say they have few to no vulnerable customers. In reality, what they have is a significant data problem – they don’t have the robust data required to know who their vulnerable customers are, let alone what challenges those customers face and the outcomes they receive. Given the clear requirements set out under Consumer Duty to identify, monitor, support and report on customer vulnerability, this a clear issue. More recently, the FCA has requested firms consider the impact of the Iran war and hence, firms need extensive data to be able to assess these scenarios.
“While firms will have different proportions of vulnerable customers based on their sector, it’s still important to benchmark ourselves against other sectors and established data points like the FCA’s Financial Lives Survey. The findings are a great example of the advancements we’re seeing in digital customer vulnerability management, helping firms to improve accuracy and bring real efficiencies to understanding, monitoring and reporting on customer vulnerability. With the right foundations in place, there is the opportunity to unlock the competitive advantage and commercial benefits of being closer to clients, improving and personalising products and services.”
The support services provider is urging firms to adopt new guidance from the Chartered Insurance Institute on managing customer vulnerability. The document outlines a practical framework to implement the principles of Consumer Duty, and establishes the benchmark for IT systems, vulnerability classification and data infrastructure to ensure firms across financial services have consistent data and can identify, monitor, support and report on both vulnerability and outcomes.
MorganAsh is a specialist in Consumer Duty and customer vulnerability. The firm launched its multi-award-winning MARS platform to help firms understand and monitor vulnerable customers and deliver good outcomes – as required by Consumer Duty. It is currently in use across financial services and the utilities sector and meets the system requirements set out in the new CII guidance.
