Understanding what vulnerability is, identifying vulnerable customers as well as
considering the needs of your vulnerable customers should be an integral part of your adviser business service. But sometimes this isn’t the case.
Let’s begin by first looking at what a vulnerable customer is. Although vulnerability is difficult to define as well as difficult to attribute, the New Zealand Human Rights Commission broadly defines vulnerable customers as being people who are less likely to cope with and recover from stresses and pressures. Determining vulnerability within the insurance industry is equally difficult to pinpoint. The Human Rights Commission suggests that those working in the insurance industry exercise flexibility to ensure accommodation.
Now that we have broadly defined vulnerable customers, let’s take a look at the proportion of insurance customers that are vulnerable customers. Insurers consistently identified around eight percent of their customers to be vulnerable. That is a significant number. They probably work with advisers in the usual proportions - so you may expect that about 8% of your clients are vulnerable at any given time. With information insurers supplied, the Human Rights Commission was able to generate a suggestive list of vulnerability criteria. Two categories were created. The first category identified that customers can be vulnerable irrespective of other factors. Identified factors are:
- Health or disability situations
- Living situations
- Family situations
- Geographic and or environmental factors
- Living in non-English-speaking households
Insurance advisers should be particularly concerned about vulnerable customers as most clients that have experienced a claimable event will probably qualify due to health, financial circumstances, and possibly living situation.
In the second category, vulnerability was found to result from intersecting factors. This means that customers are vulnerable not because of one or more overarching
factors of vulnerability, but because several ‘milder’ factors of vulnerability intersect. Identified factors are:
- Health or disability situations
- Living situations, including employment, geographic location and dwelling
- Family situations, including support provided by family, friends or support services
- The degree of support they provide to other people, especially family members
- Ability to understand insurance policies and processes.
Keeping vulnerability at the forefront of our minds allows us to accommodate vulnerable customers at all stages. The Human Rights Commission notes that consideration of vulnerability can be built into business operations from the point of sale to the time of claim. This works to add value to business by valuing customers and better managing risk.
It is paramount to understand that the same factors can impact people very differently. This means that we cannot state the severity or mildness of a certain factor. It is equally important to understand that people aren’t limited to the number of factors they are exposed to at a single period. In some circumstances, people can be exposed to multiple factors of vulnerability. And lastly, the factors of vulnerability and periods of vulnerability can change over time.
This fits well with the FMA’s view that vulnerable customers are not so much ‘types’ as circumstances.