Aggregator regulation and company scorecards - more dual pricing crackdown details revealed

Aggregator regulation, a clamp-down on auto-renewals, and company scorecards have been revealed by business secretary Greg Clark as part of the wider plan to kick out the loyalty penalty.

In a letter to the CMA addressing its recommendations following the Citizens Advice Super Complaint into unfair pricing for loyal customers last year, Clark said he was committed to tackling the problem.

As well as allowing the CMA to fine firms directly, without going to court first, Clark listed a string of other measures he hoped to introduce.

These included the following:

·         Exit/entry equivalence: people must be able to exit a contract at least as easily as they can enter it;

·         Auto-renewal should generally be on an ‘opt-in’ basis upfront, and include a clear and prominent option without auto-renewal in most markets;

·         Exit fees should not be used after any initial minimum/fixed term;

·         Auto-renewal onto a fresh fixed term should not generally be used;

·         Customers must be sufficiently informed about the renewal and any price changes (through sufficient notifications) in good time;

·         Switching should generally be managed by the gaining supplier so that customers do not have to contact their existing supplier if they want to move.

Aggregator regulation

The CMA found that across the five sectors raised in the Super Complaint, including home insurance, it was costing consumers £4bn.

To help consumers shop around and identify the best deals for them more easily, Clark also referred to the CMA’s past study on digital comparison tools (DCTs).

He backed the CMA’s findings that aggregator sites were beneficial in bringing down prices and increasing competition, and said they have the potential to help remove dual pricing practices by allowing consumers access to better deals for less effort.

“We are considering the earlier recommendations from your Digital Comparison Tools market study,” he said. “This includes, in particular, the suggestion to consider bringing DCTs into the regulators’ scope where they are not already and how best to enable services spanning more than one sector.

“We also endorse your proposed ‘CARE’ principles for DCTs including smart-data services, that they should be clear, accurate, responsible and easy to use.”

Supplier action

Clark further advised that new technology and the increased amount of data businesses now have on customers should be used to help them onto their best deal.

“The prevailing approach of relying on consumer engagement and providing them with ever more information to make choices must evolve,” he said.

“As a principle therefore, I support the CMA’s view that more onus needs to be put on what suppliers are doing than it has in the past, while still empowering consumers to find the best deals and make firms work harder for their custom.”

The actions laid out have won support from leading industry players.

Rob Townend, managing director of Aviva General Insurance, said Aviva had led the way in tackling dual pricing through AvivaPlus and that further industry change was needed.

He said: “It’s right that government and the regulators consider ways to ensure consumers pay a fair price and have a range of options when they buy or renew their insurance.

“Our work continues, and we are committed to helping the industry reform.”

Pricing interventions

Among other options discussed by Clark, he did not rule out allowing the regulator to make pricing interventions, but did say this should be a last resort.

He said such interventions must be “targeted, proportionate to the scale of the harm and minimally distortive to the wider market.”

Further legislative and regulatory change could be introduced, he added, to ensure regulators and the CMA have the tools they need.

Direct Line said that action is needed to remove dual pricing, and that for the last few years it has been reviewing the accounts of long-term customers to ensure they are not paying inflated prices.

“As a result, many of our customers have already seen their renewal premium either frozen or reduced,” a Direct Line spokesperson said.

“The industry needs to actively tackle this issue which is why we signed up to the ABI’s Guiding Principles committing insurers to take steps to address the issue and we continue to work closely with the FCA to ensure the market works as well as possible for all customers.”

Performance scorecards

Clark further backed the CMA’s recommendation that regulators publish data on the size of the loyalty penalty between what new and existing customers are paying, as a reliable evidence base.

He suggested performance scorecards would provide a set of comparable data on the loyalty penalty and other measures of consumer outcomes for each company.

”The scorecards will provide transparency on the outcomes which regulated companies deliver for their customers and allow the government, regulators and consumer groups to monitor performance and hold suppliers to account,” he said.

And the AA welcomed this aspect of the plan.

An AA spokesperson said: “We welcome efforts to improve transparency of pricing for consumers. All of our products are priced according to the needs and requirements of our customers. Any offers or discounts are explicitly advertised and we indicate when discounts will expire. We also advise customers of previous prices paid.”