£1,000-a-year cost of being a loyal customer
Why everyone should shop around for household bills:
FAMILIES who remain loyal to companies providing their energy, broadband and other essentials suffer an annual penalty of almost £1,000, research shows.
Households miss out on huge savings by failing to shop around for everything from gas and electricity to home insurance, according to Citizens Advice.
A typical tactic used by providers is to charge existing customers more in order to offer cheap deals to attract new business.
The research found this is common in six key markets – energy, mobile phones, broadband, home insurance, fixed rate mortgages and savings accounts.
Citizens Advice put the penalty for loyalty at £110 a year for energy customers, £113 for broadband (including pay TV services) and £264 a year on mobile phone contracts, including the cost of a handset.
It added that families are effectively overcharged £13 a year on home insurance and £439 by sticking with a fixed rate mortgage when cheaper deals are available.
The study found savers were losing out by some £48 a year by leaving their money in a bank account with poor returns, rather than trying to find a better rate of interest. The organisation said older people, who may be vulnerable, are most likely to stick with a household services company or bank.
The group is concerned that some companies deliberately make it difficult for customers to leave existing deals and shop around. This includes bombarding them with complex terms and conditions, lack of notice when a deal ends, and financial penalties to exit a contract.
Citizens Advice is also calling on the Competition and Markets Authority to investigate the way vulnerable loyal customers are used to subsidise others. Gillian Guy, the organisation’s chief executive, said: ‘It is unacceptable that
‘Letting them get away with it’
consumers who stick with their existing provider of important services like energy and broadband are penalised for their loyalty.
‘Companies routinely use tactics that take advantage of human behaviour – and regulators are letting them get away with it. That’s why regulators need to take action by setting targets to reduce the number of loyal customers who pay over the odds, and investigating solutions for vulnerable customers.’
She said the Government’s promise of a Green Paper setting out new consumer rights and protection should include provisions to stop loyal customers being exploited.