By Esmée Hardwick-Slack
This probe follows a ‘super-complaint’ from Citizens Advice which stated that customers who stick with their supplier are losing a total of £4.1bn a year (around £877 per person) across 5 markets – mobile, broadband, home insurance, mortgages and savings. It said 8 out of 10 consumers were paying a “significantly higher price” in at least one of the identified markets with their existing supplier.
When preparing the complaint, Citizens Advice surveyed 3,030 people responsible for household bills, as well as analysing official data to calculate the loyalty penalty.
Gillian Guy, chief executive of Citizens Advice has said, “it’s completely unacceptable that consumers are still being ripped off for being loyal to companies they rely on every single day. As a result of this super-complaint, the CMA should come up with concrete measures to end this systematic scam.
“Regulators and government have recognised the loyalty penalty as a problem for a long time, yet the lack of any meaningful progress makes this super-complaint inevitable.”
The charity also noted that while the new price cap on energy will cut bills for loyal customers by an average of £75, its analysis found “excessive process for loyal customers can be as high – of not more so – in other markets”.
In light of the complaint, The Financial Conduct Authority (FCA), has announced that it will investigate whether loyal customers are paying too much for car and home insurance. It has said the industry had already improved competition by “helping longstanding mortgage borrowers switch to a better deal” and will continue to work with regulators “to make this as easy as possible”.
The insurance industry has also promised to make changes after admitting that long-standing customers occasionally pay more than new ones. Director General of the Association of British Insurers has said “in a competitive free market, where three of four people shop around, there is no easy fix available, and these measures will take time to bed in”.
The Competition and Markets Authority (CMA) has now said it has received the complaint and will “investigate concerns raised that people would stay with their provider – often on default or rollover contracts – can end up paying significantly more than new customers”, adding that it would publish a response within 90 days.