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Would you let a robot choose your mortgage? How auto-switching could save Britons £18bn a year


"Sign up once, save forever." Sound too good to be true? That’s the tag-line for Weflip, a new service from Go Compare, one of Britain’s biggest price comparison websites.

Simply tell it how much you pay for energy, and it will switch you to a better deal without you having to lift a finger. It could soon do the same for your mortgage, your broadband and your car insurance.

But how comfortable would you be with a robot fixing your mortgage for 10 years? Or signing you up with an internet provider that provides poor service in your area?

This robot is a possible answer to one of financial services’ worst-kept secrets – the loyalty penalty, which last month prompted charity Citizens Advice to raise a "super-complaint" with the competition watchdog.

The issue is rife wherever consumers sign up to an introductory offer for a fixed period, such as a mobile phone contract, and then get moved on to a higher rate. Unless a consumer is engaged and switches to a better price, they will be punished.

Research from broker Freedom Finance, in conjunction with economist David Hillier from the Strathclyde Business School, found that Britons pay more than £18bn for their "personal finance paralysis".

This is the problem auto-switching seeks to fix.

Weflip is not the first company to try it in the energy sector, but it is the first major firm to announce publicly that it aims to extend the concept to mortgages and insurance.

Users will sign up for free – in minutes, the firm says – and pick their first switch, based on a recommendation of the best tariff available. Then the algorithm takes over.

When a customer could save £50 or more, they will be switched – every time a saving is available, potentially several times a year. Customers will have 14 days from the date of the switch to reverse the decision if they don’t agree.

Like its rivals, the service does not cover the whole market, although a spokesman said it had 63 suppliers signed up.

Go Compare is the biggest name to try auto-switching, but it’s far from the first. A company called Look After My Bills made headlines in August when its founders received a record investment on the BBC’s start-up show Dragons’ Den. Launched in January, it has amassed 75,000 customers.

Co-founder Henry de Zoete said anything that raised the profile of auto-switching was a positive step. But he added: "The key question for anybody signing up is trust. Price comparison sites have a chequered past, to say the least, when it comes to doing the right thing."

Another rival in the energy space is Labrador, which has around 5,000 customers. Founder Jane Lucy said it was important that any auto-switching service took exit fees into account.

Auto-switching services are already beginning to expand beyond energy. Look After My Bills is planning to add broadband to its service in the coming months, while Labrador is also looking to widen its offering.

Go Compare has not given any specifics on what the next steps could be for Weflip, except to say there’s "potential" to look at other industries in the future, which could be years away.

But auto-switching across the rest of your life could be a reality much sooner than that.

Recently launched personal finance app Multiply is on the cusp of receiving the relevant permissions from the City watchdog to begin offering automated advice.

Once it’s fully up and running, consumers will sign up, input their details and receive personalised advice for all their financial products, from their mortgage to their savings account to their pension.

Vivek Madlani, the app’s founder, said he was expecting to receive the relevant permissions to provide recommendations across the world of personal finance by the end of the year. The goal for next year, he added, was to move to the next stage – actually processing the transfers themselves.

He admits that building the tech to do this is a serious challenge. "We have dedicated two years to getting our algorithm right," he said. "It’s not been done before. The only people who provide these recommendations right now are human advisers."

He added that due to regulation, unlike for energy, the customer would always be required to accept the advice before the transfer took place.

While handing over control of your energy bills to a robot is one thing, the regulation in other areas suggests that extending auto-switching to the rest of your financial life is a trickier proposition.

The dangers of relying too much on automation were illustrated by a recently reported case involving digital mortgage broker Habito. Although customers continued to receive advice from a human, the firm’s attempts to reduce the number of questions borrowers needed to answer could could lead to problems.

In this case, a buy-to-let landlord was told to evict her tenant or pay her lender, Natwest, an exit fee of £2,500 because she had not told them the tenant was in receipt of state benefits.

Habito admitted that it should not have advised the borrower to remortgage, although it said this happened during a session with a human adviser and was not a mistake made by its algorithm. The company has agreed to cover any fees incurred as a result.

David Hollingworth, of mortgage broker L&C, said picking the right mortgage was not as simple as just choosing the cheapest price, and would depend heavily on the borrower’s life situation and future plans.

"We want to move to a position where people are getting better value, that’s what we all strive for," he said. "But when it comes to handing over control of something as big as a mortgage, I think there are questions that would need to be answered."

In insurance, too, experts have their concerns. While some policies may be straightforward to switch, others such as life insurance are complicated offerings that depend on a person’s specific circumstances.

Kevin Carr, an expert in life cover at Carr Consulting, said: "If we can get to a stage where all your medical information is digitised and a comparison website can access it to show you the best deals, then maybe it could work. But I don’t think the world is ready for that just yet.

"With home insurance, nothing really changes unless you move house; with car insurance, the same. Your home and your car don’t get ill but you could, and that could change things for your life cover."

It’s not just about loyalty: the Freedom Finance research found that many people don’t switch because of the opaque, confusing language used by financial firms.

So would auto-switching truly solve the of consumer engagement with their financial lives – or worse?

Clearly, comes to handing management your finances to a robot, it’s not as simple as flicking a switch.


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