Phil Michell: AI holds ‘opportunities’ to address ‘black and white situation’ with vulnerable customers

Defining and identifying a vulnerable customer is not a “black and white situation” in insurance, according to Phil Michell, customer experience director at Davies.

The FCA defines vulnerability as referring to “customers who, due to personal circumstances, are especially susceptible to harm, particularly when a firm is not acting with appropriate levels of care”.

The regulator added that its ”view of vulnerability is as a spectrum of risk” as individuals’ circumstances change or evolve over time – this is especially pertinent in today’s climate following months of high inflation last year, the ongoing cost of living crisis in the UK and possible digital exclusion as technology develops at pace.

Vulnerable customers are also specifically flagged in the FCA’s Condumer Duty rules, which came into force in July 2023.

”Under the Consumer Duty, firms should act to deliver good outcomes for all customers, including those with characteristics of vulnerability,” the regulator outlined.

In February 2024, the regulator asked insurance customers to self identify as vulnerable, disclosing their additional needs when speaking to insurance firms.

However, “the challenge is [that] only [a] few customers will actually declare themselves as vulnerable when asked,” Michell says. 

A possible solution, according to Michell, is the use of artificial intelligence (AI).

He believes this technology could help bridge the gap between vulnerable customers and insurance firms, as well as help companies to meet the regulator’s requirements to support vulnerable customers. 

He continues: “AI with a combination of speech analytics and external data sources allows us to start to go through that process [of identifying vulnerable customers].

“There are certain words [and] terms that will be used by a customer explaining certain attributes of vulnerability. The customer may use extended pauses, [for example]. AI can be used to guide the customer’s journey.”

Michell is passionate about supporting vulnerable customers following his father’s dementia diagnosis. However, he also feels that improvements in this type of support can be made.

He adds: “I don’t think any [firm] is [supporting vulnerable customers] really well [at] the moment because it’s a challenge from a data perspective – how do you join the data from an extrapolation perspective? That’s something AI can do well because it can model various scenarios, test and then we can go and look at it in a few weeks’ time.

“The important part for AI is allowing us to take all those attributes and effectively project forward – is the customer vulnerable now and is that customer portraying attributes that would indicate future vulnerability that we might want to take into account?”

Problem solving

Using AI can also assist around customer complaints.

Currently, there is a standardised process in insurance associated with capturing customer complaints and resolving them within a certain period, Michell explains.

He continues: “What AI allows us to do is look at that information, [correlate it] with voice feedback and then [look] at trends over time. Therefore, [we can] start to forward project where complaints are likely to take place and take intervening action to be able to address those issues.”

For Michell, where AI really comes into its own is where firms can “supplement other datasets” with the technology.

For example, AI can help break down the complexity of insurers’ policy documentation, supporting customers to “interrogate policies” and work out in what situations their cover applies. 

This is particularly important when insureds are looking to make a claim because “customers who are going through a claims process already have some element of vulnerability”, Michell notes.

“It feels like a wonderful opportunity to address a fundamental customer issue, which is the average reading age,” he adds.

In other sectors, such as the water industry, a vulnerable customer register exists. However, no such list exists in insurance – partly due to the fluid circumstances that impact vulnerability.

Michell concludes: “With vulnerable customers, the secret is in asking the question – is there anything I can do to help make your life easier?”