Four Places Your Loyalty Is Exploited
August 30, 2018 .

Growing up one of my guiding principles has always been loyalty.

I have also always valued loyalty and thought it is a quality that should be rewarded…

Wrong. So Very Very Wrong.

I personally found out the expense of loyalty with my energy & gas.

I have been using the same provider for over 6 years (Energy Australia) and called to check up on my bill. On a whim I told them that I was thinking of changing service providers – they instantly offered to increase my discount from 17 to 34%, cutting my bill by $300 year.

I then performed a similar exercise with my health insurance and reduced my premiums by $348 per year (although I had to change providers to achieve this).

I was quickly learning that having the loyalty of the Australian Liberal Party can pay some hefty dividends.

King of The Rip Offs – Financial Services

Big financial institutions understand the real value of a loyal customer – ripping them off, so they offer better deals to new customers.

In the recent Productivity Commission’s (PC) brief 686-page report into “Competition in the Australian Financial System” they concluded that:

The huge product variety combined with price obfuscation provides latitude for exploitative price discrimination… Typically, it is existing customers that get a poor offer, as institutions jostle to attract new customers…relying on their lassitude for switching to generate high margins off them in the years to come.

Effectively, financial institutions understand that existing customers don’t switch either because they think they are getting a good deal, or they are lazy, and therefore gouge them to fund the acquisition of new customers.

Loyalty Costs you $2,500 Per Year

While $300 a year on energy isn’t a huge amount, the stakes are raised exponentially when it comes to financial services. Based on data within the PC’s report, findings in the ongoing royal commission, along with our own analysis, we estimate the average consumer is slugged with a “loyalty premium” of $2,500 per year – broken down as follows:

ServiceLoyalty Premium
Life Insurance$250
Savings Accounts$275

It’s worth understanding how the financial institutions exploit your loyalty:


The PC’s report estimated that existing customers of banks pay 0.3-0.4% relative to new customers. This means on the average loan of $400,000, existing customers pay an extra $1,400 per year.

The banks do this by offering bigger discounts and honeymoon rates to new customers – these eventually expire, and the clients revert back to higher rates.

Some lenders also keep introducing benchmark rates for new clients making it difficult for existing clients to understand what their actual interest rate is; particularly when compared to new customers.

Plenty understands the tricks the banks play and gives live notifications if your mortgage rate changes – find out more about what we do here.

Life Insurance

Every year Australians are living longer (~2% longer) – this means that life insurance companies can lower their premiums by ~2% per year and still keep the same profit margins.

However, these price decreases are only passed onto new customers – existing customers are left in more expensive policies. While 2% a year doesn’t sound like much – after just 5 years of having a policy in place you are already paying over 10% more than a new customer who is getting the exact same product.


Superannuation companies are known for exploiting laziness rather than loyalty.

The PC recently estimated Australians are paying $2.6 billion extra a year because of unintended multiple Superannuation accounts. That’s $1.9 billion in excess insurance premiums and $690 million in excess administration fees – meaning that, on average, each working person is paying $200 per year in unnecessary fees.

On top of these excess administration fees, Australians often pay way too much in investment fees to manage their money. The average investment fee in Australia is 1.1% – this compares to lower cost funds which are often ~0.7% (or below). By not switching (i.e being lazy), the average Australian is paying $400 more than they should each year.

The loyalty premium in super is even more dangerous as the affects are compounded over multiple decades.

At Plenty we understand this – that is why we analyse a person’s existing super arrangements in the Financial Roadmap’s (see sample here) we generate.

Savings Accounts

It is common for banks to offer favourable promotional rates that only last for a few months when an account is opened.

For example, the figure below from the PC’s report depicts the applicable interest rate for savings accounts available as at 30 November 2017:


The advertised rate vs. the “actual” rate can often have a difference of up to 2%. This can really add up especially given how consumers aren’t that fond of switching bank accounts. A survey by Galaxy Research for the Australian Bankers’ Association found that only 17% of respondents had switched banks in a three-year period, while 83% had not.

Get Back the Loyalty Premium

The best way to get back your loyalty premium is to get on top of your financial situation, understand what exactly you are currently paying and what better offers are out there.

This can be easier said than done – financial institutions purposefully obfuscate pricing and make switching seem harder than it really is.

At Plenty we understand the games these institutions play – that is why we compare over 1,700 super funds, 12 life insurers and work with over 20 lenders when you get your financial roadmap.

Check us out and get started today.

The information contained on this page is of a general nature and may not be appropriate for your personal circumstances. You should obtain personal financial advice before acting on this information.

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