The Auto-switching Revolution
Auto-switching in the current climate.
Dragons’ Den has become somewhat of a BBC stalwart. Now in its sixteenth series, spanning thirteen years and a with running total of seventeen ‘Dragons’, the business innovation show has been home of success stories such as Reggae Reggae Sauce, and some not so memorable products such as a single driving glove to remind you which side of the road to drive on.
However, the next big success story may have recently passed through the infamous lift, after a new energy switching service won ‘the best deal in the history of Dragons’ Den’ by securing a £120,000 investment. Look After My Bills is a service for the energy market which automatically switches customers to the cheapest gas and electricity deal when their current deal runs out. It is no secret that switching between tariffs is something that most people tend not to do, even when we know that doing so could save us money. Look After My Bills aims to eliminate the hassle.
Interestingly, new research from Walnut Unlimited offers wider perspective on auto-switching in general. While we know that there are already murmurs in the energy market, our research reveals that there is in fact a good appetite for a similar service across other markets, offering a great opportunity for those quick enough to grasp it.
The hassle of switching, and why we don’t switch
First, some thoughts on switching. For most, switching providers – be it for your energy, mobile phone contract or broadband – is too much hassle. We know that we can probably save money by doing so, in fact we are often explicitly told so. Yet many still choose not to, why is that?
One explanation may be something known in psychological circles as the endowment effect. In simple terms, this means that we tend to overvalue things that we own. Someone might think that they are already getting a good deal on their home insurance, even if they are told that there are better deals out there. The endowment effect ties in to the idea that humans are naturally loss averse – we would rather stick with what we have than risk ending up with something worse.
On a more basic level, there is not always a high level of engagement when people think about their household bills. For some, as long as the lights come on and they can use the internet, that’s good enough. Not everyone wants to spend time scouring the market for a better deal.
The appetite for auto-switching
It is perhaps not surprising then that Walnut’s research shows that there is an appetite for auto-switching across multiple markets – as humans we are always on the lookout for something that will make our lives easier. The research shows that half of motor and home insurance customers would be interested in an auto-switching service, closely followed by 45% of those that have a home broadband contract.
Q2. Auto switching is a service that is being offered for household bills such as electricity and gas. When your current electricity or gas deal comes to an end the service automatically switches you to the best deal on the market at the time – saving you the hassle of shopping around for a better deal. How interested would you be in a similar service for the following products? Base – all respondents owning product (476-1473).
This finding alone should highlight the huge potential growth of auto-switching. It is further bolstered by our finding that two-thirds of people just want the best deal when their contract comes to an end, which is exactly what auto-switching offers. Meanwhile, 61% agreed that they would be more likely to consider auto-switching if they could just check the key product features before the switch happens. Half would consider auto-switching if they could check the brands beforehand.
Q4. Please state whether you agree or disagree with the following statements where 1 is strongly disagree and 5 is strongly agree. Base: All respondents. 1897.
Additionally, one in five said that they would be willing to pay for an auto-switching service. This rises to 36% of 18-24 year olds and 30% of 25-34 year olds. This may be one of the more surprising results of our research if we consider the role played by price comparison sites in these sorts of markets. Seeing as these sites are free to use and already do half the job of an auto-switching service by finding the best deal, it is interesting that there is a sizeable chunk of the population, particularly young people, that would be happy to pay for auto-switching simply to save themselves the effort.
Auto-switching therefore looks like it could break the deadlock when it comes to moving between suppliers. The simplicity of auto-switching means that we don’t have to deal with the hassle of looking for a new deal. It also means that it is not down to us to make the decision about who to switch to, which might overcome some of our psychological barriers. Dragons’ Den might be considered a light entertainment show, but the investments are real. If Look After My Bills can win a six-figure investment, what role might auto-switching play in other markets?