Record numbers of people save money after taking part in Ofgem’s latest collective switch trial
Around 30% of disengaged customers who took part in Ofgem’s latest simplified collective switch trial changed their energy deal.
- Nearly seven times more people switched in Ofgem’s latest collective switch trial than those who received no information
- Vulnerable consumers and those without access to the internet also likely to benefit
- Results of trials will help inform Ofgem’s plans for a more competitive retail market after the price cap is lifted
This was almost seven times higher than the 4.5% switching rate for customers who received no extra information.
90,000 disengaged customers, who had been on a default standard variable tariff for three years or more, took part and those who switched saved on average £263.
The customers received letters inviting them to switch to a collective switch tariff negotiated by the price comparison service energyhelpline.
When selecting the collective switch tariff, Ofgem required energyhelpline to choose a supplier that had a good customer service rating.
Unlike other collective switches, customers did not have to provide complicated information about their existing tariff to see a personalised savings calculation, making it easier to start a switch.
The switching rate for customers on the Priority Services Register (who are often in vulnerable situations and tend to switch far less frequently) was almost as high as for other customers in the trial.
Customers without access to the internet could also be more likely to benefit, as 71% of customers who switched through energyhelpline chose to do so by phone.
The collective switch completes Ofgem’s latest round of trials to find the best ways to help disengaged customers make better choices about their energy.
Ofgem introduced the price cap on default tariffs in January this year to ensure that customers who do not switch pay a fairer price for their energy.
The results of the trials, which Ofgem published in full recently (27 September 2019), will help inform Ofgem’s ongoing plans for a more competitive retail market after the price cap is lifted.
According to the default tariff cap legislation, the price cap must be lifted no later than 2023, but can be lifted sooner if Ofgem believes conditions for effective competition in the retail market are in place.
In total, 1.1 million energy customers have been part of Ofgem’s engagement trials, and 94,000 of them have switched to better deals – many for the first time - saving around £21.3 million.
The simplified collective switch is one of the variants Ofgem has been trialling of the database of disengaged customers that the Competition and Markets Authority (CMA) recommended following its investigation into the energy market.
We do not consider that a database is required to support such engagement initiatives and are looking at alternative ways of enabling the necessary data to be shared, aligning with our open data and data mobility initiatives.
Mary Starks, Ofgem Executive Director for Consumers & Markets, said:
“Ofgem’s latest simplified collective switch, and the wider programme of engagement trials we have been running, show the potential to get the energy market to work better for disengaged customers, including the vulnerable.
“The results will inform our plans to ensure that customers still get a fair deal and that more enjoy the benefits of competition after the price cap is lifted.
“In the meantime, customers who do not switch will always pay a fair price for their energy under the price cap.”
Notes to Editors
- In January - March 2019 around 90,000 customers who had been on a default tariff for 3 years or more were selected to take part in a collective switch trial. These customers received a series of letters, which signposted them to an exclusive 12 month fixed tariff and offered switching support through an independent third party (energyhelpline). 30% of customers who received the letters switched, compared to 4.5% in a 'control group', who did not receive a letter. Customers saved an average of £263 by switching.
- To target ‘disengaged customers’ these trials only included customers who had been on a default tariff for three years or more.
- To ensure the companies had good service ratings, suppliers who had a Citizens Advice rating of 2.5 stars or above were eligible to bid for these customers.
- Ofgem recently published 7 documents, which have more details on how the trials were designed and implemented, as well as the key results and insights. 1.1 million energy customers have been part of these trials, with 94,000 switching to better deals, saving almost £21.3 million. The 2016 CMA energy market investigation recommended that Ofgem obtain powers to require energy suppliers to test the impact of prompts designed to increase engagement.
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