The Competition and Markets Authority (CMA) published its final report on the 26th September 2017 following its market study of digital comparison tools (DCTs).
On the surface, the report seems positive, with the CMA concluding that DCTs:
- Make it easier for people to shop around
- Improve competition and encourage more competitive pricing
- Were easy for most consumers to use, with the clear majority (96% of consumers) being satisfied with the experience
- Allowed 44% of recent users to negotiate a better deal with their existing supplier
The use and importance of DCTs has grown in recent years, with the CMA reporting that 85% of UK consumers with internet access had used a DCT, whilst the largest DCT for home insurers saw a 44% growth in sales in the three years leading up to October 2016.
However, DCTs have acknowledged that vulnerability is a challenge for them as they ‘cannot identify vulnerable consumers’ and that consumers do not self-identify as vulnerable, or wish to be considered as such. It will always be a challenge for DCTs to identify vulnerability, given the service has minimal direct human interaction, with the user experience taking place separate from staff.
This does not mean DCTs cannot put in place measures to assist in identifying and assisting vulnerable customers who have accessed their platforms – but what actions should they be taking to ensure vulnerable customers receive fair outcomes?
key CMA recommendations and what firms should be considering
The CMA asserts that in order to help mitigate access issues and inadvertent barriers caused by DCTs, financial services firms should develop broader policies to help improve consumers’ access to, and awareness of, DCTs.
As well as this, it found that some aspects of DCTs’ design were not universally accessible, particularly for the visually impaired and those using screen readers. The CMA recommended DCTs ensure their websites meet minimum standards, with the potential that a failure to make reasonable adjustments could be considered contrary to the Equality Act 2010. The report recommends that DCTs and consumer / charity organisations should work more closely to address vulnerable consumer needs.
Given some of the CMA’s assertions, financial services firms should be reasonably content with the user experience that DCTs are providing as an intermediary. However, it will be important for them to:
- Not presume instances of consumer vulnerability will have been identified by the intermediary during the sales process
- Consider how to manage and mitigate conduct risk when selling and marketing digital based products
- Ensure governance arrangements between their organisation and DCTs are in place with clear and effective policies to identify, address and mitigate issues of consumer vulnerability
- Consider how a non-compliant DCT process could have adverse effects on brand, reputation and trust for the firm, along with the potential for it to invite regulatory scrutiny
- Reflect upon how this technology has the potential to reduce their ability to offer manual interventions and maintain the flexibility needed to deal with customer vulnerability
Huntswood has recently published white papers on Managing digital conduct risk and Delivering fair outcomes to vulnerable customers. Both papers outline steps firms can take to improve their operations.
Ensuring sufficient consideration of customer outcomes
DCTs doubtlessly bring enormous benefits to vulnerable customers. Extending the available channels by which vulnerable customers can source and purchase products can better allow them to choose a method of purchase that suits their circumstances. It minimises the need for consumers (who may otherwise struggle to engage with financial services) to visit branches or speak to organisations over the telephone.
Firms should not be cautious about utilising DCTs, as they can offer greater operational efficiency, reduced costs and greater revenue, along with improving the customer experience and journey. However, firms have obligations to vulnerable customers, and this has been recognised by regulators across a variety of industries, with the FCA requiring firms to pay due regard to the interests of their customers and treat them fairly.
Therefore, it is important firms give consideration to how their relationship with DCTs is to be managed, and the controls that should be embedded to mitigate the risk of customer detriment. Firms may wish to consider a mechanism by which outcomes from DCTs can be tested to assess how any policies and procedures are being practically applied.
Ultimately, DCTs and firms should examine their processes and procedures to ensure the benefits are as widespread as possible, whilst ensuring the risk of adverse consequences materialising is minimised.