Are you being charged for your loyalty?
PUBLISHED: 18:13 02 October 2018 | UPDATED: 18:13 02 October 2018
What’s the cost of being a loyal customer?
Well, according to the Citizens Advice Bureau it’s around £4bn a year - or £877 per person per year, writes thrifty living columnist Sheena Grant.
That’s what the CAB reckons is the difference between what loyal and new customers pay for the same services and products on everything from mobile phone contracts and broadband to home insurance policies, mortgages and savings.
It found this ‘loyalty penalty’ is disproportionately paid by vulnerable consumers, such as older people and people with mental health issues, who are particularly likely to struggle with switching.
The bureau has lodged a so-called super-complaint with the Competition and Markets Authority (CMA) about the over-charging scandal.
Its chief executive Gillian Guy said: “It beggars belief that companies in regulated markets can get away with routinely punishing their customers simply for being loyal. As a result of this super-complaint, the CMA should come up with concrete measures to end this systematic scam.
“Regulators and government have recognised the loyalty penalty as a problem for a long time - yet the lack of any meaningful progress makes this super-complaint inevitable. The government’s price cap in the energy market will protect some loyal customers. However, there’s still a long way to go in other sectors.”
I’ll say there is. And I’ve got a perfect example of just what the CAB is complaining about.
I was contacted this week by a reader, called Kaye, whose elderly parents have been loyal customers of a large home insurance company for more than 10 years, auto-renewing their policy every year.
By chance, Kaye discovered this year that they were being charged £350 for insurance on their three-bed semi.
She said: “I went onto a comparison website and found they could get comparable insurance elsewhere for just over £100.”
Kaye complained to the company on her parents’ behalf and they agreed to reduce the price but, she says, next year she’ll make sure they shop around.
It really shouldn’t be up to people like Kaye to call these companies out before they mend their ways though. If they won’t treat all customers - including loyal ones - fairly measures should be introduced to force them.
The CMA has 90 days to respond to the CAB’s super-complaint and say whether they agree there’s a problem and, if so, how they plan to address it.
In the meantime, however, always make sure you shop around and never auto-renew anything.
Use comparison websites to search the market for the best quote. In the case of insurance, if you’re not confident online, go to an insurance broker, who can do the shopping around for you.