Merlyn Holkar, Research Officer, Money and Mental Health
A nudge in the right direction - Ofcom’s recent announcement
13 August 2018
We heard some exciting news recently from Ofcom, the telecoms regulator, that has the potential to help people with mental health problems save money on their bills.
Ofcom are proposing that telecoms providers will have to notify customers when they’re nearing the end of a contract for their broadband, telephone (landline or mobile) or pay TV services. Currently, few providers send these reminders and deals often roll on by default, meaning that customers miss out on better deals elsewhere, or see their prices increase over time.
“More than 20 million customers of these services are currently outside their minimum contract period, and more than 10 million are on deals with an automatic price increase at the end. This means millions of people could be paying more than they need to.”—Ofcom
The idea is that these reminders will prompt people to engage at the crucial moment when a contract is about to expire and savings can be made.
Behavioural Economics tells us that timely nudges such as this can spur us towards better outcomes, and in practice, similar nudges have proven extremely successful in other markets. Research from the financial regulator, the FCA, has demonstrated that alerting customers when they are about to enter an unarranged overdraft can help them to reduce costly charges by up to 24%.
What does this have to do with mental health?
Ofcom’s proposals should be helpful for everyone, but it’s likely that they’ll make a particular difference for people with mental health problems.
Common symptoms of mental health problems can make it harder for people to keep on top of financial management and manage telecoms contracts. Some people with mental health problems have difficulty understanding complex terms and conditions, and don’t know what will happen when their contract expires, whilst others can struggle to keep track of expiry dates.due to an unreliable memory.
Telecoms providers often structure their contracts to take advantage of customer inertia, with prices rising automatically unless the customer takes action. This model penalises those who can’t be bothered to shop around, but also those who struggle to manage contracts through no fault of their own, such as many people with mental health problems. This creates a perverse system were savvy switchers are subsidised by those who are unwell.
Is a nudge enough?
Ofcom’s proposals directly address difficulties that many people with mental health problems face, prompting engagement for those who don’t understand terms and conditions or aren’t able to keep track of expiry dates due to memory problems. These measures should make a tangible difference, boosting market accessibility and stoking competition in telecoms markets, improving services for all customers.
However, even with a nudge, many who are unwell will still be unable to engage at the crucial moment. When people are unwell they can often lack motivation, even for hobbies and seeing friends, can lose capacity to make financial decisions altogether, or focus all of their energy on their health. These symptoms can make it practically impossible to engage with telecoms providers at crucial moments – even when you know you should.
And those who are able to engage may still struggle to actually navigate complex telecoms markets and find the best deal. Common symptoms of mental health problems can make it harder for us to compare different options, particularly when there are lots of providers and products are structured in different ways. Other people are unable to complete a switch if they are forced to make a telephone call to cancel a contract or transfer a PAC code. More than half of people with mental health problems (54%) have serious difficulties using the phone to carry out this sort of admin.
We’re pleased to see Ofcom taking action to support vulnerable consumers and make telecoms markets more accessible, and we encourage them to go further.
New technologies could play a vital role in levelling the playing field. Tools like automatic comparison and switching services promise to reduce the pressure on consumers to be well, and engaged in the market, in order to get a fair deal. Ofcom should take a leadership role here, to ensure that innovation boosts market accessibility for vulnerable customers, and doesn’t leave them behind or discriminate.