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A lot more! A study released 4 October by the Financial Conduct Authority shows customers paying £1.3 billion over the odds.*
The report is critical of the insurance industry for exploiting customer loyalty.
Companies set high renewal premiums if they think the customer is unlikely to switch. They then increase premiums annually using a process called ‘price-walking’. This means they set the premium according to the increase they think the individual will pay NOT the policy or the cost of cover.
The authority has acted partly in response to a Citizens Advice campaign to cut the ‘loyalty penalty’.
Millions who don’t or can’t switch supplier in essential markets are paying much more than they should. As well as insurance, the markets include fixed-rate mortgages, energy, broadband and mobile including handsets.
We welcome the FCA findings.
They support our ‘super-complaint’ to the Competition and Markets Authority in September 2018.** The FCA is considering a range of remedies. They might stop companies charging higher prices to customer who don’t switch. Or make them automatically switch customers paying high prices to lower-priced products with the same cover.
* General insurance pricing practices, Interim Report, FCA, October 2019 ** Excessive prices for disengaged customers: a super-complaint to the Competition and markets Authority, Citizens Advice, September 2018 NOTE The response of companies and regulators to demands for better treatment of loyal customers could help rebuild trust in business and capitalism itself. Our blog Essential services, loyalty and consumer capitalism, May 2019