Consumer Vulnerability Strategy

Key Take Aways

1. The strategy aims to improve consumer outcomes by focusing specifically on vulnerable groups within the energy market, with clear themes and measurable objectives.
2. It adopts a principles-based approach, encouraging energy companies to embed fairness, transparency, and inclusivity throughout their operations.
3. Four main themes underpin the strategy: smarter use of data; support for those struggling to pay bills; enhancing customer service; and inclusive innovation.
4. A cross-sector collaboration approach is emphasised, recognising that vulnerability issues are multidimensional and require joint action across industries and stakeholders.
5. Transparency and industry accountability are prioritised through regular vulnerability focus sessions, public progress reports, and compliance monitoring.
6. The strategy reinforces the importance of a broad vulnerability definition, encompassing personal circumstances, market interaction, and their complex interplay.
7. Enhancements include leveraging digital tools such as AI, better data sharing, and inclusive design to address needs effectively.
8. Proposed outcomes are specific, with a focus on reducing debt, improving billing accuracy, and diversifying support mechanisms tailored to individual circumstances.
9. The approach emphasises ongoing learning from good practice and external insights, with a strong emphasis on stakeholder engagement and consumer research.
10. Outcome measurement involves qualitative and quantitative metrics but recognises challenges in monitoring innovation and behavioural change.
11. The strategy underlines the critical role of standards of conduct and licence conditions in fostering fair treatment and supporting vulnerable customers.
12. The strategy envisions a sector transformation driven by cultural change, innovation, and collaborative regulation to build trust and mitigate detriment for consumers in vulnerable situations.

Key Statistics

• One in three adults (approximately 18 million people) are deaf, have hearing loss, or tinnitus.
• Around 16.1 million (24%) of the UK population had a disability in 2022/2023.
• Over 2 million individuals live with sight loss.
• 47% of disabled working-age adults report mental health impairments.
• 15% of respondents aged 65+ with household incomes below £15,000 reported being in debt to their energy provider as of April 2024.
• By end of September 2024: 7 million adults were behind on at least one household bill, with an average arrear of £1,568 for electricity and £1,324 for gas.
• Approximately 5.6 million households are in fuel poverty in the UK (July 2024).
• 44% of adults found it very or somewhat difficult to afford energy bills in early 2024.
• 19% of adults lack essential digital skills; 11.9 million are digitally disengaged.
• Vulnerability prevalence is influenced by factors such as income, age, health, and housing circumstances, with the elderly and low-income groups most at risk.

Key Discussion Points

• The strategy seeks to embed a broader vulnerability framework within the energy sector, with a focus on individual circumstances and market design influences.
• Emphasis on using data smarter, including digital tools like AI and data sharing infrastructure, to better identify and support vulnerable consumers.
• Support mechanisms include better billing practices, flexible payment options, and tailored, compassionate customer service responses.
• Clear expectations are set for energy companies to proactively identify those struggling financially, with ongoing support and reduced burden in notifications and updates.
• The importance of inclusively designed innovative solutions and wider sector collaboration to ensure access and benefit for consumers in vulnerable situations.
• Cross-sector working is vital, with a recognised need for policy makers, consumer bodies, and industry to act collectively on issues like payment difficulty and energy affordability.
• Future monitoring will involve annual progress reports, vulnerability focus sessions, and compliance enforcement to ensure continuous improvement.
• The strategy highlights the need for cultural change within energy companies, fostering a fair, transparent, and consumer-centric industry environment.
• Existing standards of conduct and licence conditions serve as critical levers in delivering fair treatment and supporting vulnerability considerations.
• Evaluation challenges include measuring success in innovation, engagement levels, and behaviour change, requiring improved data and research methodologies.
• Weaknesses in current support—such as the limited scope of priority support schemes—are acknowledged, with calls for broader, inclusive approaches.
• The approach adapts in response to evolving sector dynamics, including the shift to digitalised, decarbonised energy systems that should be accessible to all.

Document Description

This article outlines Ofgem’s refreshed Consumer Vulnerability Strategy, a comprehensive framework designed to enhance outcomes for consumers in vulnerable situations within the energy market. It details strategic themes, operational principles, expected outcomes, and governance mechanisms aimed at embedding fairness, transparency, and inclusivity into the sector. The document emphasises collaborative regulation, sector-wide good practice, and innovative solutions, aiming to foster a cultural shift towards customer-centricity. It also addresses the importance of data-driven support, sector resilience, and continuous improvement in delivering fair, accessible, and effective energy services for vulnerable consumers across the UK.