The energy price cap announcement from Ofgem on the 3rd February 2022 will see increases of over 53% in energy bills for households in the UK (United Kingdom), starting from April.
The price cap is due to affect those on default tariffs and those who remain with a new supplier after a previous supplier exited the market – over 22 million customers in total.
An ever-changing landscape for suppliers and consumers
The changing priorities for energy suppliers
As markets constantly change and come under pressure, the customer experience has been a core focus of many energy suppliers over the last few years. Transformation journeys have focused on providing an exemplary service, creating competitor differentiation, reducing churn, and beginning to provide products and services that support the energy transition. With rising wholesale costs to battle with and increasingly tight margins, the energy industry is even more complex to navigate.
However, following the recent price cap announcement and growing concerns from consumers on energy affordability, suppliers must readdress their agenda. It is now more important than ever to focus on understanding customer circumstances and utilise technology to ensure appropriate solutions are being provided to reduce the risk of missed payments and growing delinquent debt.
How will the price cap impact consumers?
Research has revealed that as a direct result of the rising cost of living, 57% of people are already struggling financially. With over 60% of households being impacted by an increase of £693 (US$936) to £1,971 (US$2,662) in their energy bills. These figures are likely to increase further too. Growing pressure will be put on suppliers to provide flexible and proactive solutions that are adaptable and compassionate to their customers financial situations
Citizens Advice announced from their independently commissioned poll in January that more than 1 in 7 (16%) would not be able to cover the price cap rise, which is equivalent to around 8.5 million people.
This puts into question, how can these customers be recognised and supported before it is too late?
How to support and recognise customer vulnerability with technology
Within the energy industry, credit and collection solutions have often been neglected. There has been a heavy reliance on historic, and rigid forms of payment plans, as well as debt collection processing. This has driven inefficiency and discouraged proactive approaches in supporting and protecting the customer’s financial position before a problem spirals out of control.
Considering the current energy crisis, and continual rises in overall living costs, this brings to the foreground the need for suppliers to utilise the right tools to protect consumers, and provide a proactive and compassionate service in line with individual financial circumstances. In turn, energy suppliers are given a level of resiliency that supports the consumer in the long run and enables them to thrive, rather than survive.
Recognising vulnerable customers
With 1 in 5 financially vulnerable customers now in arrears, suppliers need access to key predictors to proactively identify these customers and provide suitable payment plans to manage those with outstanding delinquent debt and future consumption. Further research has also indicated a definitive correlation between mental health wellbeing and debt, with 50% of adults struggling with debt also having poor mental health.
This highlights the greater need for suppliers to ensure they have the right segmentation model in place to address customers’ circumstances and their ability to pay. Providing vulnerable customers with a compassionate service, and alternative methods of communication and payment, can help ease the burden and anxiety often associated with building debt. Utilising self-service technology allows customers the flexibility and control to manage their payments and can also address those who are often reluctant to get in touch directly with their supplier.
“75% of people surveyed who struggled with anxiety stated they avoided face-to face, phone and postal communications altogether regarding managing their utility bills.”
Remaining resilient
For suppliers to support and protect their customers’ financial position, they must stay resilient and adaptable in an ever-changing market. Customers need an energy supplier that supports them, has their best interests at heart and provides them with options.
Investing in flexible and customisable credit and collection technology that provides self-serve tools, and personalised payment pathways is key to maintaining adaptability and a compassionate, customer-centric business model.
