What is the ‘Loyalty Penalty’?
Citizens Advice recently issued a super-complaint referring to the practice of many businesses across several industries charging loyal customers much more than new ones. This is known as the ‘loyalty penalty’. They do this by offering cut-price deals to entice new customers before increasing the price as the years go on, sometimes with limited communication and clarity.
The markets where this is most prevalent are:
- Home insurance
- Savings Accounts
This super-complaint, issued to the Competitions and Markets Authority, aims stop this practice by forcing the market regulators to investigate and take appropriate action to protect consumers from being ripped off. These complaints often facilitate big changes with the last Citizens Advice super-complaint concerning the missale of PPI resulting in over £31 billion being returned to consumers.
How Does It Affect Me?
The Citizens Advice report found that 8 out of 10 bill payers in the UK are paying the loyalty penalty in one or more markets, meaning it’s pretty likely that you, or one of your family members, are paying too much. In the worst offending market, mortgages, the average penalty can be as much as £439 a year.
Up to 64% of consumers are not aware of the loyalty penalty and the report found that at-risk groups such as the elderly and low income households as more likely to be paying extra.
In the home insurance sector, 1 in 3 policyholders have had their policy for over 5 year, with these customers paying around 70% than their newer counterparts.
What Are We Doing About It?
Here at TopQuote, we value our clients and strive to give them great value, no matter how long they’ve been with us. We regularly review our home insurance policies and contact clients that we think could be paying less. If you have any questions about our home insurance policies, or want to see if you could be saving money, give us a call on 0161 233 3110.