A study has revealed that over two thirds of people plan to swap their financial products or providers for ones that provide a better deal or improved communication channels. The ‘Switching Up’ survey by Experian, the global information services company identifies the volume of customer movement that the financial services industry can expect this year and the motivation behind the churn. It also analyses the types of people that are more likely to switch.
The analysis highlights that with belts tightening further this year, switching is driven predominantly by consumers unable to afford the payments or the cost of their existing commitments, with over four fifths (83 per cent) saying they need to change financial product or provider for this reason. Financial products most likely to be switched are car and home insurance along with utility suppliers.
The findings highlight the need for providers to better understand their customers in terms of what they can afford, especially with increased regulatory focus on responsible lending and treating customers fairly.
Other key drivers of switching highlighted in the survey were the quest for additional benefits (77 per cent), a cheaper price (71 per cent) and better customer service (63 per cent).
Demographic insight – who is most likely to discard a current provider or product?
The younger age groups are the most switching savvy. Almost three quarters of both the 25-34 and 35-44 age groups (71 per cent and 73 per cent respectively), with the majority living in Scotland (76 per cent) or Yorkshire and Humber (75 per cent), are planning to make a swap in the next 12 months.
Experian’s Mosaic classification – a comprehensive analysis of UK consumers – reveals that switching will be highest amongst the ‘Careers and Kids’ group, primarily consisting of young married couples and cohabitees who have young children. Four fifths (81 per cent) of this group plan to find an alternative for at least one of their financial products.
Switching will also be high amongst the ‘New Homemakers’ group , mainly one-person-households of varying ages who live in homes which are likely to have been built only in the last five years. They account for over three quarters (78 per cent) of switchers.
Homeowners and those with mortgages on their properties are more likely to look around for a better deal (73 per cent) than renters or people that live at home (64 per cent) with their families (60 per cent).
Which financial products are the most vulnerable?
With the car insurance market now notoriously competitive, in part due to the growth of aggregators, consumers want to shop around for the best value policy. Almost two thirds (61 per cent) of car insurance customers say that they will switch this year to obtain a cheaper price (73 per cent) or additional benefits (68 per cent), making car insurance the product that will experience the most churn.
Home insurance is the second most popular product to change, with 53 per cent of consumers planning to do this in the next 12 months, followed by gas and electric suppliers (34 per cent).
Jonathan Westley, Managing Director of Experian’s Consumer Information Services UK & Ireland, commented: “This analysis highlights the extent of the challenge financial services organisations face in trying to understand the credit risk of customers, as well as whether the products they are being offered are suitable to them. With greater focus on lenders to ensure their affordability assessments are as accurate and robust as possible, they must use all the data available to them to ensure they are making realistic judgements of a consumer’s ability to fund debt, both in the short and long term.”
*Based on a survey of 1087 consumers during February 2013, 69 per cent of UK adults are planning to switch financial services provider in the next 12 months.