The Financial Conduct Authority (FCA) has published an Occasional Paper analysing the impact of an ageing population on financial services. The findings are that older consumers are at risk of being excluded from some services, and propose that firms find innovative solutions to the increasingly complex but important relationship between older consumers and their access to financial services.
The Ageing Population Project, which started back in February 2016, identifies a number of risks present in financial service product and services currently available to older consumers. Amongst these was the concern that older generations may not be eligible for certain important services such as insurance, retail banking, third party access and later life lending including mortgages.
The FCA hopes that these findings will encourage firms to better serve older consumers as part of its overarching strategy ‘Approach to Consumers’, which is due to be published later this year.
Why is this paper important?
The FCA concluded that, at present, older consumers, in particular those aged over 75, are facing restrictions over which financial services they have access to.
For example, studies conducted by AgeUK found that a huge 97% of annual travel insurance policies require new customers to be below a certain age limit. This leaves older consumers with no options for insurance and thus at risk when travelling. In addition, those with an existing medical condition (a particular problem for older folk) face much larger premiums and possible exclusion when applying for travel insurance.
The Office of National Statistics reports that the UK’s population is at a record high, with 18% of citizens aged over 65, and 2.4% aged over 85. With the population of the UK getting older, it’s important for the financial services sector to adjust its products and services to meet the needs of this growing section of society.
So, what solutions do the FCA propose?
The FCA proposes that firms review their current policies relating to the age of their customers so that the financial services sector can support all customers as they age.
In particular, firms are encouraged to re-evaluate their product and service designs to ensure that they are not excluding certain consumers based on age. If this means creating new products and services to meet this growing target market, then perhaps this is something we should be investigating.
Due to the potential vulnerability of older consumers, the FCA also urged firms to assess the ways in which their advisers qualify customers for products. The Occasional Paper also asked firms to ensure that customer service strategies focus on making older customers aware of their consumer rights and dealing with these customers in a fair and considerate manner.
The ageing population is a new focus area, and one that may take time for the industry to adjust to, and so the FCA concedes that this is not necessarily one group’s responsibility. Firms, regulators and perhaps even other official bodies need to work with industry to find innovative ways to resolve the current issues.
The FCA’s Director of Life Insurance and Financial Advice, Linda Woodall, said:
“We hope that today’s paper will help drive further positive innovation in the interests of older consumers. Our findings highlight the extensive public policy challenge requiring action from firms, government, regulators and other parties to bring about improvements for older consumers who use financial services.”
As the UK’s population ages, no doubt we will see a shift towards better financial products and services that address the needs of everyone. As always, Grovelands will keep you posted on any new trends within the sector. Let us know if we can provide further advice on ensuring your advisors are meeting these changing needs.