Power bills are surging and consumers are being urged
to compare deals and take their custom elsewhere if they
are paying too much. But is it as easy to switch as the
companies urging you to do so suggest
The chances are that the neediest customers - the poorest
and elderly - are least likely to switch because they
are put off by difficult comparisons and hidden barriers.
According to Which?, the consumer lobby group, the average
person would save £100 a year by switching power
supplier and a further £100 by switching home insurance
provider.
But while the National Consumer Council found that switching
levels increased between 2000 and 2005 in all markets
except insurance, it also found that the young and wealthy
are much more likely to switch than those who are poorer
and older.
The very people most in need of the cheapest deals are
those who find it hardest to make comparisons between
providers. This is often because they don't have access
to a computer or are not computer literate, and don't
realise that they can get help from their local library
to use internet comparison sites. Many also come from
a more trusting generation and don't suspect that they
are paying too much.
Although switching has become easier over the years,
helped by changes in the law and voluntary codes, Alena
Kozakova from Which? says there are still hidden barriers
to prevent customers from voting with their feet. The
most obstructive are lock-in contracts which tie customer
for fixed period unless an exit penalty is paid. Typically
lock-ins can apply to mortgages and some fixed-rate utility
deals.
"Lengthy and cumbersome switching procedures, or
an excessive amount of research needed to track down a
better deal, can make switching inconvenient and outweigh
the benefits," says Kozakova. "Technical incompatibility
of equipment can make it uneconomical to switch, say between
mobile phones, as can free equipment, which again affects
mobile phones and internet providers."
Other barriers are confusing or complicated tariffs and
non-transparent pricing, which make comparisons difficult.
But despite these obstacles consumers are becoming more
adept at switching when big money is involved, particularly
when chopping and changing between mortgage lenders can
save hundreds of pounds a year.
Kozakova says: "It is worrying that people have
the perception that changing is difficult and also that
their supplier is doing a good job even if they are paying
too much. The easiest switch is between energy providers
and the incentive is that bills are very high and getting
higher."
But according to Energywatch, the gas and electricity
watchdog, consumers keen on peace of mind can switch to
the wrong deal. Some energy suppliers offer capped or
fixed-price deals to protect customers from unexpected
price rises, but these often result in paying a higher
rate than customers on the standard tariff, unless both
gas and electricity are taken from the same provider.
The British Gas fixed-price deal offers today's prices
until April 30 2009 to customers who take both fuels.
But gas-only customers must pay a premium of 2.3 per cent
. Exit fees for leaving before the end of the fixed period
are £20 for electricity and £30 for gas.
If you want to switch your current account, the Banking
Code requires banks to pass details of direct debits and
standing orders to other banks with three days. The banks
reckon they are up to speed, but Which? found that 44
per cent of customers changing bank experienced some inconvenience.
Some 17 per cent thought their old bank took too long
to pass details of standing orders and direct debits to
the new bank while 15 per cent missed a payment because
of bank delays.
Seymour Fortescue, the chief executive of the Banking
Code Standards Board, says: "I think the idea that
there are problems switching current accounts is largely
perception rather than reality. Research from the Department
of Trade and Industry has shown that people who switched
in other fields were reluctant to switch bank accounts.
But I suspect this is because they thought it would be
complicated and also because they thought one bank was
much like another rather than because the process is complex."
Broadband users are often locked into year-long contracts
and even when the contract ends many complain about the
difficulty to switching to another internet service provider.
Most large ISPs have signed up to a code that gives BT
the authority to make a forceable switch within five days.
Unfortunately, cable telephone lines are not covered and
small ISPs may not have signed up.
The biggest obstacle to switching is the fear of losing
an existing e-mail address. There are ways round this,
but many customers end up running two accounts in parallel
for a couple of months to ensure that they receive e-mails
sent to the old address.
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