New research released today reveals that the nation is losing billions to home insurance, car insurance and energy providers for failing to shop around.
In the last week alone, both British Gas and Virgin Media have announced huge price increases. British Gas customers will see their electricity prices increase by 12.5%, in a move that will affect 3.1 million customers – Virgin Media’s will see their bills leap 4.7% – affecting up to five million households.
The brand new ‘The real price of being too nice’ report – from Joe Gladstone, Assistant Professor of Consumer Behaviour at University College London, research consultancy Populus and GoCompare – shows that despite prices constantly rising, 32% of people have never switched their energy supplier, 28% have never switched home insurance and 18% have stuck with the same car insurer.
1 in 4 consumers have never bothered to switch their service providers. In total people who have never switched services are £2.1bn a year worse off based on energy, home insurance and car insurance alone.
The report highlights an interesting link between a person’s personality traits and why some people switch while others are more hesitant to shop around: conscientious people are found to be most likely to switch while agreeable people are the least likely to switch.
When it came to switching across the UK – Newcastle has the highest rate of switchers, with the Welsh city of Cardiff having the lowest.
Behavioural Economist and Assistant Professor at UCL, Joe Gladstone said: “In the energy market, lots of default tariffs of energy suppliers are a bad deal for consumers. Consumers can get a good deal if they keep switching every year but the reality is a lot of people don’t know how to do that because they don’t know when it is they need to switch.
People in the UK experiencing financial distress are also less likely to shop around, calling to question the efficacy of industry initiatives, such as FCA’s recent requirements for insurance renewal notices. While the experiments in this report show that the initiative does increase the likelihood of people shopping around for another quote, it misses those most in need – the financially distressed who are reluctant to even look at their bills.
Matthew Crummack, Chief Executive Officer of GoCompare, said: “While many financial service providers and energy companies regularly tell their customers that they want them to be loyal, our research suggests that this loyalty is actually costing consumers billions of pounds a year in higher bills. And the burden often falls most heavily on those least able to afford it, or those too nice to switch. Our report reveals the extent to which this tendency to over-pay is even greater when standard industry practices are combined with certain consumer character traits.
“To beat the bills, people need to get bothered and get switching. But industry players also need to address the issues raised here. Financial and energy providers need to communicate more effectively. Letters and bills often aren’t read in detail by the most financially distressed, and so they need to be easier to understand. People shouldn’t receive communications telling them that it’s business-as-usual and that they needn’t take any action, when the cost is actually going up.”
The reality is that big corporations don’t like switchers and customers’ misplaced loyalty is costing people big – £2.1bn collectively, for no other reason than not switching.
Insurance providers need to be more open and transparent as well, without their usual faux-friendliness on notices, like, ‘relax, you don’t need to do anything’ or ‘we have your bank account details so will simply renew your insurance for you,’ and suchlike.