Analysis: From banks to insurance, companies punish loyal consumers with higher prices, while new customers are rewarded with better deals
By Marek Martyniszyn, Queen's University Belfast
There’s growing concern that many of us are being quietly overcharged by service providers. Consumers are urged to check their contracts and avoid overpaying, especially when better deals may be just a click away.
In a market economy, we benefit from competition. We enjoy choice, innovation and, most of all, paying less. Price matters. But competition doesn’t work unless we, as consumers, play our part. It takes two to tango. Without active engagement from consumers, the benefits of competition stall.
We’re used to shopping around when buying goods, but the economy has shifted. Many services now run on a subscription model. You sign up once and continue paying indefinitely. That’s where the so-called 'loyalty penalty’ creeps in. Companies quietly raise prices or reduce service quality - or, in the case of goods, shrink product sizes (have you heard of shrinkflation?) - relying on the assumption that we’re not reviewing our contracts or comparing alternatives. It’s easier than ever to be taken for granted—or taken for a ride.
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From RTÉ Radio 1's Today With Claire Byrne, just how worthwhile are loyalty cards?
The loyalty penalty is both costly and unfair. Those who stay loyal are often punished with higher prices, while new customers are rewarded with better deals. That’s upside-down logic. In other walks of life, loyalty is valued. In many markets, it’s penalised.
A well-known example is car insurance. Letting a policy auto-renew without shopping around usually means overpaying. The same applies to mobile phone plans. If your contract includes paying off a handset, but you don’t renegotiate once the term ends, you’ll keep paying the same high price—even though your phone is already paid off.
Another important example is health insurance. Recent research shows that consumers in Ireland have been facing very steep price increases. Effectively, if they stayed with their providers—they were paying a loyalty penalty.
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From RTÉ Radio 1's Today with Claire Byrne, there are significant savings to be made on mortgage switching but is it worthwhile?
In a cost-of-living crisis, every euro counts. Yet many of us still pay hundreds more each year than we need to. Making time to review your recurring bills might be one of the simplest ways to ease household pressure.
Market regulators like the Competition and Consumer Protection Commission (CCPC) can do their bit by removing barriers and making switching easier, but they can’t force us to act. If we accept poor deals or bad service, competition loses its power.
Fortunately, tools for switching are improving. In the UK, the Competition and Markets Authority (CMA)’s Open Banking reforms means switching current accounts can now be done swiftly without any hassle. All your payments and standing orders move automatically. Even transfers to your old account get redirected. I know, I’ve used it! In effect, UK banks are now offering over £150 to new customers, yet fewer than 3% of UK adults make the switch each year.
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From RTÉ Radio 1's Today with Claire Byrne, what's the best current account for you?
In Ireland, bank switching may not be as common as it should be and new research shows that over 60% of Irish customers have stayed with their main bank for over seven years. Inertia still wins. However, bank switching can be done here.
Of course, not everyone finds it easy to switch. Some people feel overwhelmed by digital tools or are unsure where to start. That’s why making comparison websites more user-friendly and support more accessible matters. Ensuring all consumers can benefit from competition should be part of the policy agenda.
We need to change that. We need to vote with our wallets. Think about your recurring expenses such as health, car and travel insurance; mobile and broadband contracts; bank services (both current account and mortgages; energy suppliers; streaming services (Netflix, Amazon Prime, Spotify) and gym subscriptions. Now ask: are you getting a good deal?
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From RTÉ Radio 1's Today with Claire Byrne, are more Irish consumers looking to switch banks?
What to do? Take action. Use free comparison tools to check your current deals and see what else is out there. Start with visiting the Money Tools pages of the CCPC. There, you'll find pages dedicated to comparisons of different service, from bank accounts to credit cards. Consider a website like Power to Switch for energy comparison. Both Switcher.ie and Bonkers.ie offer useful comparisons across broadband, mobile services, insurance products and more. (I have no connection with these sites and this isn’t an endorsement, just a suggestion.)
For competition to work, consumers must take an active role. We cannot afford to be passive. If we fail to challenge rising prices or deteriorating service, we weaken the very forces that should be working in our favour. Markets respond to signals, and consumer behaviour is one of the most powerful signals there is. The rewards for engaging are real: better prices, improved quality, and fairer treatment. In short, when we act, competition delivers.
Final tip: Get empowered, go shopping and shop around. If consumers start switching more often, businesses will need to treat their customers better to keep them. So next time your policy auto-renews or your bill creeps up, pause and take control. A better deal might be just a few clicks away.
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Prof Marek Martyniszyn is a Professor of Competition Law and Policy in the School of Law at Queen's University Belfast.
The views expressed here are those of the author and do not represent or reflect the views of RTÉ
