Helping consumers make informed choices

Blog
Clem Perry

Clem Perry

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Supply and Retail Market

We want to see a retail energy market with more informed and engaged consumers, making better choices and getting better deals.

 

If we are to realise this vision, it is essential that suppliers provide consumers with the information they need to compare energy tariffs and choose one which suits them. It is also essential that they are not misled or mis-sold to.

For this to happen, suppliers absolutely need to put consumers at the heart of their business.

That is why, last month, we overhauled the rules around the information suppliers give their domestic customers in their sales and marketing activities, making them stronger and clearer. 

Specifically, we replaced six pages of detailed rules with five binding ‘principles’ – overarching enforceable requirements that explain the experience that we expect suppliers to deliver for their customers.

Under these new principles, suppliers must make sure that:

  1. The structure, terms and conditions of their tariffs are clear and easily comprehensible
  2. Their tariffs are easily distinguishable from each other
  3. They put in place information, services and/or tools to enable consumers to easily compare and select tariffs that suit their characteristics and/or preferences
  4. They do not mislead or use inappropriate tactics, including high pressure sales techniques, when selling or marketing to consumers
  5. They only recommend tariffs which are appropriate to that consumer’s characteristics and preferences.

These five binding principles require suppliers to focus on really considering what customers need to make an informed choice about their energy supply.

There are three key reasons why these binding ‘informed choices’ principles should better serve consumers than detailed rules.

 

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Firstly, principles are more effective at forcing suppliers to think about what is really right for consumers because they focus on what their customers experience. This is in contrast to a long list of detailed rules, which can sometimes create a ‘box-ticking’ culture whereby suppliers end up focusing more on internal processes than the thing that really matters – the experience of their customers.

Secondly, experience has shown us that prescriptive rules can become outdated and prone to loopholes as new ways of doing things emerge. Detailed rules, for example,  can struggle to keep pace with the rapid pace of technological development including supplier’s rising use of smart apps and other mobile devices to sell and market their products. By forcing suppliers to focus on delivering positive consumer experiences, principles provide more effective and future-proofed protection as the energy market evolves.

Lastly, principles allow for some flexibility in how suppliers deliver positive consumer experiences and are therefore much better at enabling innovation. In contrast, by dictating a ‘one size fits all’ approach, detailed rules can act as a barrier for businesses wanting to do things differently – and better – than before. Customer communications are an excellent example of where we think suppliers have particular scope in inform and engage with their customers in new and innovative ways, which is why we’re updating the requirements around them.  

This is a good thing for individual consumers and should generate greater competition amongst suppliers, as customers vote with their feet on products and services. In turn, this should result in a more efficient and innovative market for all consumers.

Suppliers should make no mistake: the move to a greater reliance on principles is not a transition to a world of ‘light touch’ regulation. Rules and standards governing their behaviour remain just as rigorous and we will demand that suppliers comply with both the letter and the spirit of these rules.

Where they fail to do this, we stand ready to take action. Since 2012, we have secured over £40m in penalties and redress in connection with mis-selling cases and we will continue to keep a close eye on supplier conduct. For example, last December we held a ‘challenge panel’, where we asked suppliers to demonstrate how they were enabling consumers to make informed choices. Following this, we also published a report highlighting the lessons learned from enforcement and compliance activity in relation to sales and marketing. 

We look forward to watching suppliers respond to these changes in a way that helps consumers make better-informed decisions about their energy supply.