Reflections on risk

How do consumers respond to risk in the current challenging economic environment?

Elisabeth DaviesChristmas and the start of a new year is inevitably a time for reflection.  For the Legal Services Consumer Panel this is heightened by our planning schedule.  We go into Christmas thinking hard about where we should prioritise our time, resources and voice in 2013/2014.

There are rightly many different influences on our thinking.  We hold ourselves to account when it comes to assessing progress against our overall purpose of improving outcomes for consumers of legal services.  We also look to the external environment – looking at the context within which consumers need, are and will be using legal services.

Just before Christmas the OFT produced a really interesting assessment of current risks facing consumers and markets, emerging risks and potential risks given trends in complaints and other intelligence.  It’s not that anything in the report was necessarily new, it’s just always stark reading when you have it all captured so succinctly in one place.

Not surprisingly, one of the loudest messages is about the impact of the economic climate and the challenges it presents to consumers. But for me one of the most significant underlying messages was around what this means for risk.  As households face continuing challenges – with incomes squeezed and prices for essential goods and services rising – consumers may become increasingly vulnerable to making distress purchases, being tempted by high risk products and high cost sources of credit.  Those on low incomes, the elderly and others in disadvantaged situations may be particularly susceptible.

So what does this mean for how consumers will use legal services?  What’s a high risk product in legal services and would consumers even know it was high risk? It raises another related question that comes up time and time again for the Panel – How unique are legal services compared to other services and products?

Last year we started a project looking at risk and the role of regulation.  It looks at the division of risk and responsibility between consumers and businesses in the legal services market and will ultimately inform a wider initiative addressing the question of whether financial protection arrangements are fit for purpose. But at the heart of the project is understanding how consumers perceive and assess risk and what trade offs – if any – they’re prepared to make.

We’ve commissioned some market research and will be publishing the report in the next few weeks but there’s no doubt it raises questions about just how different consumers think legal services are.

And this is important.  We’re asking legal consumers to drive competition by voting with their feet when buying legal services but if they think these services are so different to other purchases and transactions, then they’re going to behave differently.  This could ultimately raise a whole new set of issues for how we engage, empower and protect consumers, and how they can have confidence in the legal services market.