Citizen’s Advice Bureau calls for penalising loyal consumers to stop

CAB press release

Citizen’s Advice Bureau has today launched a super-complaint with the Competition and Markets Authority (CMA). It is calling for the regulator to look into how consumers are being penalised for loyalty in 5 key sectors. It requests an outline from the CMA on how the problem can be fixed.

CAB’s press release said:

“Citizens Advice has revealed customers who stay loyal to their providers are losing out on over £4 billion a year.

The practice of overcharging loyal customers is widespread and Citizens Advice has repeatedly warned that loyal consumers are being ripped off.

Research by Citizens Advice found that across 5 essential markets (mobile, broadband, home insurance, mortgages and savings):

British consumers lose £4.1 billion a year to the loyalty penalty.

8 in 10 people are paying a significantly higher price, in at least one of the markets, for remaining with their existing supplier.

The loyalty penalty is, on average, £877 per year – equal to 3% of the average household’s total annual expenditure.”

ABI and BIBA

Back in May of this year, the ABI (Association of British Insurers) and BIBA (British Insurance Brokers’ Association) launched a set of Guiding Principles and Action Points  The ABI and BIBA has said it wants its insurance industry members to provide all the information about switching in their correspondence to customers.

Graeme Trudgill, Executive Director said “This guidance was a massive step forward in addressing any large discrepancies in premiums between new business and renewal and was put in place after the CA survey was done which informed their report.

In addition the FCA requirement to advise customers that have been with the same provider for several years that other providers are available – their ‘increasing transparency and renewal in general insurance markets’ – launched mid 2017 and may not have been reflected in the research.

“Though some customers may be able to obtain lower premiums it is important to en sure that the cover they have is suitable. Our members, insurance brokers most often do not set premiums and are able to help customers with the ‘shopping around ‘ at renewal. Since the launch of the principles and action points we’ve been highlighting to members the importance of double checking that customers who have been with the same insurer for a while are being offered a fair premium and we will continue to push this message hard with our members.”

The Financial Conduct Authority

The Financial Conduct Authority (FCA) has added its support. In a press release it stated:

“The FCA has been concerned about the issue of long-standing customers being charged more for some financial products than new customers for some time. This has informed our earlier work on cash savings and mortgages.

In the FCA’s 2018/2019 Business Plan we announced that we were looking at the pricing practices of general insurance firms. As part of that work we will launch a market study looking at how general insurance firms charge their customers for home and motor insurance. The terms of reference for this market study will be published in a few weeks’ time.”

Update 22/09/20 The FCA sets out proposals to tackle concerns about general insurance pricing

Government stance on loyal consumers

To coincide with the super-complaint The Department for Business, Energy and Industrial Strategy (BEIS) launched a review of Smart data to protect consumers from rip-off tariffs to look at how the use of technology, such as comparison tools and open banking, can support consumers. It will also cover the speeding up of creative and innovative approaches.

Consumer Minister Kelly Tolhurst said:

“Britain has long been a world leader in ensuring that markets work in the interests of consumers, but many loyal customers are still paying more than they need to.

The Smart Data Review will enable the development of new technologies to make it easier to access the best deals, and follows tough action we have taken in the energy market through our price cap which will protect over 11 million households from poor value default tariffs this winter.

It is our modern Industrial Strategy in action, ensuring markets provide consumers with keen prices and quality products and services through cutting-edge innovation.”

The Government has said it “… wants to ensure that all consumers can benefit from these types of innovative new services, not just those who are digitally savvy and regularly look to switch providers.” But if the review is to only look at technology, one wonders how.

In previous research, CAB found that it is the most vulnerable who are hit by these penalties. It’s exploitation of vulnerable consumers plain and simple.

Let’s hope things are moving in the right direction, and fast!

Help and resources in saving money when renewing cover

All you need to know about complaining to telecom providers

All you need to know to make a complaint about energy

How to save money on your car insurance

Top 20 tips for complaining effectively

If you don’t get satisfaction from customer services write to the CEO. You can find their contact details on the CEO email website. You are unlikely to get a personal response but it will escalate matters.

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