Outlook has never had the ability to deal with passwords expiring, until now! The Microsoft Outlook team has released updates for Outlook 2010 and 2007 that provide Office 365 users with password expiration notifications. The advance password expiry notification will be displayed in a pop-up message (near the system clock) within a certain time period before their password actually expires. That time period is configurable by the tenant admin (see links below for more info). For users whose passwords have already expired, Outlook will flash an error message when users try to connect to their mailbox. In both scenarios, Outlook also provides a link (URL) to update passwords via the browser. When users click on those links, they are taken to the Microsoft Online Portal to change/update their passwords.
The knowledge base article for this update can be found under the KB2745588