Household bills are a significant expense with consumers spending an average of £200 per month and many worrying about them. Consumers are still paying more than they need to.

Whilst many consumers have switched at some point, this is by no means a regular occurrence. Our research shows there are three switching mindsets with different perspectives, priorities and behaviours. GoCo Group is on a mission to help people save money and we are transforming the Group to meet their varying needs.

1. Estimates based on a survey of average switching rates for Car Insurance, Home Insurance & Energy
2. Across Car Insurance, Home Insurance and Energy
3. AutoSave segment includes combined numbers on both weflip and Look After My Bills
4. Implied potential market opportunity for Car Insurance, Home Insurance and Energy based on industry switching rates and average industry switching fees
5. According to Ofgem’s latest State of the Energy Market, 53% of households are on Default Tariffs (October 2019)

Car insurance premiums

  • Through 2019 major insurers continued to report rising claims inflation as repair costs increased, driving a need to review their insurance premium pricing
  • On 15 July 2019 the Government also announced an increase in the Ogden discount rate from -0.75% to -0.25%. This was lower than the 0–1% widely anticipated, and further increased the need for higher premiums
  • Therefore, following declines in 2018, car insurance premiums returned to growth in 2019 with further increases expected

Car insurance switching volumes

  • Latest management estimates indicate car insurance switching volume returned to growth in the second half of 2019; as with premium prices, this is expected to continue into 2020

Car insurance premiums

The car insurance switching market is closely linked to how insurance premiums are changing. As car insurance premiums, and in particular renewal prices, increase there is a greater catalyst for change and consumers are more likely to shop around to try and get the best deal. Conversely, when renewal prices are declining or even flat consumers are less likely to look around, even if they could be making a saving.

Through 2018 insurance premiums declined year on year as pricing for car insurance was impacted by uncertainty about the Civil Liability Bill. This obtained Royal Assent in December 2018 and provided the insurance industry with much needed certainty on the Ogden rate through 2019. As such through 2019 car insurance premiums started to return to growth. However, this growth was slower than many in the industry had predicted and lower than claims inflation, as insurers took a somewhat cautious approach. Industry experts are therefore expecting further increases to car insurance premiums, and renewal prices, through 2020.

Car insurance switching volume

Following a challenging 2018 for our core switching market which coincided with decreasing car insurance premiums, 2019 saw a gradual recovery in the switching market. As car insurance premiums started to increase in the second half of the year, the car insurance switching market returned to growth and delivered the strongest quarterly growth in the final quarter of 2019 for almost two years.

Through this period GoCompare has maintained its disciplined financial approach – rather than chasing unprofitable volume. This puts the business in a strong position to capitalise as the growth in switching volume is expected to continue through 2020, providing a positive tailwind for the Group.

Energy switching

According to Energy UK, the number of people switching their energy supplier in 2019 continued to increase and set another record year for energy switching. This record growth comes despite Ofgem introducing an energy price cap on standard tariffs in January 2019 which had been expected to stifle the volume of switching in the market.

The price cap was introduced to prevent the exploitation of loyal customers who do not shop around and hence are on the energy supplier’s most expensive tariffs. However, the price cap was increased in February, shortly after its introduction, which appears to have acted as a stimulus for households to switch their energy. Despite strong increases in the number of customers switching their energy over the last 12 months, the majority of households did not switch and, with an estimated 15 million households still on the most expensive default tariffs, considerable savings remain.

Energy suppliers

Despite a number of supplier exits in 2019, the total number of suppliers in the UK domestic energy market has remained constant at approximately 60, following a number of new entrants. This has increased significantly from 12 in 2010 (source: Ofgem), and has led to far more consumer choice and competition, reducing the market share of the big six energy suppliers from almost 100% in 2010 to c.75% by 2019.

The increased competition has helped ensure bills remain low, with the average dual fuel bill in 2018 being 8% less than it was in 2013. However, more opportunity remains for competition to benefit customers, with Ofgem data showing that wholesale and network costs represent only 61% of the cost of a bill compared to 70% in 2013 whilst operating costs increased from 13% to 18% over the same period.

New switching services

Automated energy switching is the simplest way for consumers to save money on energy, every year. It’s where the switch process is managed for the customer; it’s a system that finds the right energy deal and switches them to it automatically. The automated switching process notifies the old supplier that the customer is leaving and sets up the direct debit with the new energy supplier. The service then checks the market to ensure the customer is on a great energy deal, always.

Automated switching enables customers to delegate their responsibility, with the aim of ensuring customers are never on an expensive energy tariff again. Automated energy switching has only been around for a couple of years but has already started to enter the mainstream with hundreds of thousands of customers using these services. There are a number of smaller start-ups that have launched similar propositions, however, GoCo Group is the only major price comparison website with an automated switching service.