After several years of falling real wages, household finances are still tight for many. Strains on Government budgets and further cuts to come will leave some households under even more pressure, despite welcome improvements in wages in recent months. Yet things can be done to help households: many can save hundreds of pounds each year by shopping around for everyday items such as energy, broadband, and car insurance. An average household can save £200 by switching their energy provider, £160 by choosing a more suitable mobile tariff, and £288 by switching their broadband. Even bigger savings can be made by getting the right car insurance and mortgage deals. However, rates of switching are low, with many consumers missing out on these savings. 62% of consumers have never switched energy provider; and a majority have had their main current account for more than 10 years. There is substantial untapped potential for savings for UK households.
Why do so few consumers take advantage of better value deals? Insights can be found from social psychology and behavioural economics that give reasons for consumer inertia. Using these insights we can design policy and regulation to help consumers engage, save substantial sums of money, and receive products and services that are better tailored to their needs. This report therefore asks why so many consumers remain inert, how inertia varies between markets, and how we can best design policy and regulation to overcome it.
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