Are loyal
customers being ripped-off when they purchase mobile phone, broadband, home
insurance, and mortgage products?
This
is the claim of the charity Citizens Advice which says that customers who remain
loyal to their current supplier are losing a total of £4.1 billion a year - amounting
to an average of £877 per person. Even more concerning, according to Citizens
Advice, it is elderly and vulnerable people who are disproportionately
affected.
As a
result of this research, Citizens Advice has made a ‘super-complaint’ to the
Competition and Markets Authority (CMA) who have 90 days to come up with ideas
for dealing with the issue. Possible outcomes could involve new laws,
enforcement by regulators, or a full market investigation.
The CMA
said it would now "carefully consider the concerns" that Citizens
Advice had raised. At the same time the Financial Conduct Authority (FCA) has announced
that it will investigate whether loyal customers are paying too much for home
and car insurance.
Gillian
Guy, the chief executive of Citizens Advice, 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."
Citizens Advice claim that while the new price cap in the energy market would cut bills
for loyal customers by £75 on average, its analysis found "excessive
prices for loyal customers can be just as high - if not more so - in other
markets." The organisation has found problems in five particular areas:
savings accounts, mortgages, household insurance, mobile phone contracts, and broadband
contracts.
It
said it knew of a couple in their nineties who were paying £1,000 a year too
much for their home insurance. And disturbingly, they had been with the same
company for six years.
The telecoms
regulator Ofcom has recently announced action to stop loyal customers paying
too much for their mobile phone contracts. The insurance industry has also
promised to make changes, after admitting that loyal existing customers sometimes
pay more than new ones.
Banking
industry group UK Finance said it would consider the issues raised by Citizens
Advice. Eric Leenders, managing director of personal finance for the body said:
"We would always encourage customers to shop around and find a deal that
best suits their needs and we will continue working with the regulators to make
this as easy as possible, including through standard terms and price comparison
tools."
It
wants all insurance firms to look at customers who have been with them for more
than five years. According to Huw Evans, director general of the Association of British Insurers: "In a competitive free market, where three out of
four people shop around, there is no easy fix available, and these measures
will take time to bed in."
Announcing
its own study into the insurance market, the FCA said it had already been
concerned about the issue for some time. "We expect firms to look after
the interests of all customers and treat them fairly, whether they are new or
long-standing," said Andrew Bailey, the FCA's chief executive. "It
is important to get the balance right, so that existing customers do not miss
out on the benefits of competition and innovation, including when they purchase
or renew their general insurance products."