Ex British Gas CEO: Be bold to help vulnerable customers

With inflation stubbornly high and energy bills continuing to soar, many households are still feeling the financial squeeze. Writing for Utility Week former British Gas chief Ian Peters explains how different forms of data can be used by companies to help the most in need. Peters, a strategic adviser to data and analytics consultancy Sagacity Solutions, says its time for the energy sector to be bold and truly demonstrate its commitment to its most vulnerable customers.

The struggle with soaring household bills remains very real as the impact of the cost-of-living crisis lingers. According to the ONS’ most recent figures, the Consumer Prices Index held steady at 8.7% in May 2023, unchanged from the previous month’s 13-month low and above market expectations of 8.4%. While energy costs are falling, these are being offset by rising prices for air travel, recreational and cultural goods and services, and second-hand cars. And while food inflation is slowing, food and non-alcoholic beverage prices have risen by 18.4% in the year to May 2023, so household budgets are likely to remain stretched for some time to come.

Personal debt is rising

For those businesses with a legal or regulatory obligation, those who consider they have a moral responsibility, or any with a business imperative to manage customer indebtedness, there is a need to proactively identify customers who need the most help or who might be falling into difficulty, as an attempt to adopt a ‘prevention rather than cure’ approach.

Debt charity StepChange revealed that while many households managed to save during the pandemic, May 2023 saw 15,483 clients accessing full debt advice – higher than the same month in previous years (May 2022 was 14,393 and May 2021 was 12,459). Its website had 315,000 users in May 2023, which is unchanged month-on-month. A ‘cost of living increase’ remains the most common reason for debt and has increased by 11 percentage points between May 2022 (16%) and May 2023 (27%).

Know your customer

In the above context, it is therefore critical that organisations not only know their customer but can maximise the insight that they have in order to offer the right kind of support at the right time. This might be through one or more of four sources. The first is the use of external data, such as third party datasets, that can support the identification of those customers who might potentially be in difficulty, providing information on changes in personal circumstances, short-term finance requirements, loss of income or employment, and changes to relationship or residential status.

Secondly, an organisation’s own internal (or first party) data can not only be used to identify those customers at risk but also provide guidance on how they should be communicated with. This can point to attributes such as long term health conditions, disabilities, providing full time for a dependent, or evidence of previous or current financial stress.

Thirdly, some industries have sector-wide databases with clients registered as high priority or vulnerable, such as the Priority Services Register for those in the energy sector.

Fourthly, there are self-declared vulnerabilities by customers. For some clients, the capability to analyse free format text in CRM systems may also offer opportunities.

It’s often possible to identify vulnerability signals in customers through changes in transactions and behaviour. It may be necessary to identify different segments or groups of customers who are classed as vulnerable for different reasons. The once seemingly ‘always in credit’ customers now feel financially stretched and are at greater risk of getting into difficulty and being unable to meet or keep up with payments. Households who choose to avoid going into debt, for example by turning their energy down or off, or by eating less, are especially hard to identify.

How to identify vulnerable customers

For responsible businesses, the first step is to proactively identify vulnerable customers to exclude from certain marketing campaigns, where communications could increase the pressure on their personal circumstances. This is an ethical approach to marketing which has also been proven to increase ROI and improve campaign success.

Both first and third party data provides a rich and detailed understanding of levels and types of vulnerability so that organisations can operate responsibly. Gaining a better understanding of differing vulnerable segments in a customer base helps drive effective communication and debt management strategies, while simultaneously ensuring fair treatment.

By combining external data variables with internal data, companies can make data-driven decisions on how to price products, reduce fraud, identify vulnerable customers, and ultimately make more personalised decisions.

It’s time to be bold

If ever there was a time for the energy sector, particularly, to be bold and truly demonstrate its commitment to its most vulnerable customers it is right now, given stubbornly high inflation, historically high energy prices and the squeeze on household incomes – all in the context of the climate emergency and the challenge of energy security.

Some changes would need to be made across the industry to avoid unintended adverse competitive effects, some probably should be done voluntarily across the sector to maximise consumer benefits, some could be done by individual suppliers for brand or competitive reasons, while a couple are arguably mutually exclusive. To start the debate, my list for consideration would be:

• a social tariff with consistently-defined eligibility criteria
• the ending of standing charges which hit those with lower consumption hardest
• the introduction of rising block tariffs to disincentivise high consumption (leaving overall supplier revenues the same)
• proactive use of internal and external data sets to identity vulnerable customers (to offer the social tariff if implemented, rather than waiting for customers to apply)
• regular scanning of consumption patterns to identify self-disconnection and proactive contacting of those customers
• creating a focus within ECO to target poor EPC-rated properties with high consumption occupied by people on low incomes.

All of these have been debated over the years. Now is the time for action.