Have you ever stopped to count how many subscriptions you’re signed up for? Streaming services, gym memberships, meal kits, software licenses—the list goes on. Now, ask yourself: how many of those have you cancelled recently after being hit with a hefty price hike? And what about your home and car insurance, or your gas and electricity suppliers? Have you switched providers after seeing the new rates?
It’s no secret that many of these charges are skyrocketing—some by as much as 50%. The strange thing is, we know we’re being ripped off, yet we stay put. It’s like the proverbial frog in slowly heated water: we feel the heat, but we don’t jump out.
The Loyalty Penalty: Why We Stay Put
In 2021, a researcher named Saltzman and his colleagues studied health insurance renewals in the US after a major insurer imposed significant price increases. The result? A staggering 90% of customers stuck with the same insurer. Why? Part of it might be the fear that switching could mean jumping “out of the frying pan and into the fire.” Or perhaps we’ve convinced ourselves that all providers are the same, so why bother?
According to behavioral economists, this inertia is a classic example of the endowment effect. We sign up for a deal, believing it’s a good one at the time, and when renewal rolls around, we let it auto-renew without a second thought. This loyalty penalty can cost us dearly. For example, in the UK, the Financial Conduct Authority found that home insurance premiums for existing customers have increased by more than 140% over five years. Ouch.
How to Fight Back Against the Rip-Offs
So, what can we do to stop being taken advantage of? Jonathan Guthrie, in a Financial Times article, shared some practical tips to combat these sneaky price hikes:
Choose Auto-Cancellation Over Auto-Renewal
If given the option, always select auto-cancellation instead of auto-renewal. This forces you to actively decide whether to continue with a service, rather than passively letting it roll over.
Set Physical Reminders
Mark your renewal dates in your diary or on a physical calendar. Studies show that tangible reminders are more effective than digital ones in prompting action.
Complain and Negotiate
Many companies offer unadvertised discounts to retain customers. If you’re unhappy with a price increase, call them up and ask what they can do to keep your business. You might be surprised at how quickly they’ll offer you a better deal.
Shop Around Regularly
Don’t assume all providers are the same. Take the time to compare prices and switch if you find a better deal. It might take a little effort, but the savings can be substantial.
Breaking the Cycle of Inertia
The truth is, companies rely on our inertia. They know we’re more likely to stay put than to switch, even when we’re being overcharged. But as Guthrie points out, we get what we deserve if we don’t push back.
I’ll admit it—I’m as guilty as anyone. I’ve let subscriptions and renewals slide without a second thought. But it’s time to change that. By taking a more proactive approach, we can put pressure on these “gold diggers” and stop paying the loyalty penalty.
So, the next time you see a price hike, don’t just sigh and accept it. Take action. Your wallet will thank you.