The Competition and Markets Authority (CMA) has received a ‘super-complaint’ from Citizens Advice in respect of price discrimination against long-term customers. Citizens Advice is seeking a response from CMA including a commitment to initiating a market study to identify remedies to end overpricing for disengaged or loyal customers.

Super-complaints can be made under the Enterprise Act 2002 by certain UK consumer organisations, including Citizens Advice, requiring an investigation into markets or practices that significantly harm consumers.

Home insurance is included amongst the markets that Citizens Advice identify as penalising existing customers. The percentage increase in the cost of home insurance can be as much as 70 per cent for long-standing customers.

The margins that firms can earn on new customers is often low. Attractive offers for new customers are sustained by offering longer term customers higher prices.  Citizens Advice suggests that loyalty can cost home insurance customers as much as £900 per year.

In particular, Citizens Advice has identified that vulnerable consumers are disproportionately affected by loyalty penalties.

What happens next?

The CMA must now investigate the super-complaint and determine whether consumers’ interests have been harmed by higher prices for long-term customers. The investigation will also involve the Financial Conduct Authority (FCA) which has also expressed concerns over insurance customers paying a price for loyalty.

The CMA must publish a response within 90 days. Possible outcomes might include:

  • Taking competition or consumer enforcement action
  • Launching a market investigation or market study
  • Making recommendations for changes to legislation
  • Action by sectoral regulators such as the FCA

View: CMA to investigate ‘loyalty penalty’ super-complaint