An increased understanding of customers’ vulnerability required under Consumer Duty regulations could help to resolve challenges around new and existing life policies, according to MorganAsh.

Software firm MorganAsh noted that another challenge is where consumers have changed employment or liability circumstances then cover may no longer be in tune with the risk.

A recent report by Swiss Re, Life Cover Payouts – under the microscope, highlighted that couples cohabiting but not married with single life policies might think that their life cover claim will go to their “common law spouse” in the event of their demise. In practice, any claimed funds are likely to be directed to next of kin, which could impact around 400,000 applicants a year.

MorganAsh suggested these are “known potential harms” and systemic challenges for protection insurance.

Under the Consumer Duty, however, insurers and advisers will have a responsibility to minimise causing systemic potential harms. MorganAsh suggested that advisers are undertaking periodic reviews then these issues are likely to be resolved, although for the vast majority of these old cases, there is no known adviser and hence the responsibility falls to the insurer.

Technical manager at Swiss Re, Ron Wheatcroft, commented: “We have highlighted there are over a million new policies a year where no direction of benefits is in place. This means death proceeds from about a third of these may not reach a cohabiting partner, but it is hard to identify which these are. The ability to use the data collected for vulnerability management seems a great opportunity to put in place solid identification of this potential harm.”

MorganAsh said that many issues can be addressed with the collection of vulnerability data as part of Consumer Duty implementations.

While some firms are relying on individual assessments of vulnerability and just recording if a consumer is vulnerable or not, other firms are now moving to collate detailed data on the consumer characteristics, and using technology like the MorganAsh MARS system to do this.

These systems are typically using initial questionnaires completed by consumers or advisers that include an understanding of the consumer’s marital status and support network.

“We are using technology to upgrade vulnerability assessments from a subjective individual’s opinion to an objective digital record of a consumer’s characteristics,” MorganAsh managing director, Andrew Gething.

“This opens up the opportunity to match the consumer needs to the products we are providing and look to highlight where there can be improvements like trusts, beneficiary nomination and revision of policy amounts.”

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