September 17, 2020

Can better bills encourage more switching?

Nobody likes bills. According to new research from Uswitch, energy bills are particularly despised.

Two years ago, Ofgem forced energy suppliers to include labels, simple language, and key information onto our energy bills. This was supposed to make the bills friendlier and easier to read, encouraging more of us to shop around.

Uswitch's new research uncovers disappointing results. They found the new bills went largely unnoticed, or worse, added to confusion. Uswitch believes that the solution is for Ofgem to try again, as soon as possible. What's going on here? Let's go through the logic step by step:

People get energy bills. By making them easier to understand, customers will have a greater understanding of how they could be saving money on their energy. So if Ofgem could just get those pesky bill regulations right, we’re hopeful more consumers might switch energy suppliers. However, all this relies on some assumptions that, despite being pretty rational, unfortunately aren't realistic: 

Assumption 1: Everyone reads their bills 

Assumption 2: People who know they can save money, will organise to switch

Assumption 3: Regulation has the power to make bills easy to understand   

Interestingly, the data from Uswitch's own study show that half of the people surveyed don't really read their bills (to inform switching decisions, at least). They didn't notice that, for example, their bill alerts them when cheaper tariffs are available.

Half of those who did notice, didn't act to snap up the savings. So we can deduce that only about 25% of people read their bill, and are also willing to organise a switch. Since this must include the 15% of households already switching (by definition), there could be roughly 10% of households at best who become 'switchers' due to new bill improvements. Even if the 'perfect bill' were attained, many of these would remain perturbed by all the work involved in selecting a new supplier, applying and managing everything.

Finally, does any regulator have the ability to make bills significantly better? They face several hurdles. Ofgem can force suppliers to include specific information, but they can't stop suppliers from including additional information, that may be confusing or cluttering.  

There's a limit to their power because suppliers have some legal rights to present bills the way they choose. At the same time, suppliers obviously have a financial disincentive to design bills that will lose them customers. This makes finding a solution hard.

Ofgem also doesn't have the necessary customer feedback loops to find out what works. They can't experiment or talk to the customers. This makes the job next to impossible. 

So the answer to our question is that new bill formats are pretty unlikely to make switching suddenly seem worthwhile for the majority of households. Ultimately, the customer experience as a whole has to be better and that requires someone focussing on what customers really want. The dynamic that Ofgem and the suppliers are engaged in hasn't allowed for that. Customers tell us that they aren't interested in the minutiae. They want to have a clear, big-picture view of what they are spending, and reliable peace of mind that they aren't overpaying. We built Flipper to make that possible. 

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