Is a comparison site the best option?

Using an Insurance distributor such as a Price Comparison website can be useful and its true that they have made the process of comparing prices and choosing insurance easier.

However, before you dive right in and choose the first quote that hits your screen, there are a few things you need to know.

1. Whilst their services are essentially free to customers, they can earn as much as 25% of the premium you pay in commission for selling a product.
2. Comparison sites do not use their expertise to recommend or assist you with buying insurance, nor do they use their buying power to negotiate better deals for their customers. Yet they still earn the same levels of commission as an Insurance Broker would.
3. Their revenue model is purely price driven, which means they are not there to help consumers and will always show the cheapest policy first. They have no incentive to hinder your decision by adding in reviews about whether a particular product is good value or not.
4. For Insurance providers who offer similar products, promoting their policy on a price comparison website is cheaper than national advertising. An increase in the number of Insurance Providers competing for the top spot creates a price war.

   The end result of a price war is either a financial loss for the insurance provider, or more commonly, the levels of cover hollowed out to reduce costs. The consumer ends up with a product that doesn’t meet their requirements and in many cases is inferior to that being offered by the Insurance Provider direct.

5. The Insurance Provider is hoping that inertia, the biggest driver of profits in the insurance industry, will assist them. When your cheap deal runs out and the renewal premium dramatically increases, they rely on the fact that you will remain with them. On the flip side, Comparison websites hope that you return to their site and buy a new policy, generating another commission payment.
6. A “Which” survey analysed 21 insurance brands on main comparison websites and found that six out of every ten quotes displayed did not match the actual policy that was purchased. By the time you are taken to the insurance providers website, the terms and conditions or the premium had changed. The report also highlighted the fact that the top results were occupied by only a handful of brands, with many brands being owned by the same companies.

There is growing evidence that the model adopted by price comparison sites is losing its ability to save consumers time and money. The Competition and Markets commission is particularly interested. Their advice to consumers is to use enough sites to make sure they see all products that are available. Exactly the job that Comparison Websites were supposed to fulfill.

The Financial Conduct Authority has also raised concerns that consumers are buying products or services based solely on the cost, even if the product is unsuitable. The FCA call this the “expectation gap”. The perception of getting a good deal, only to find out that the cover was not as comprehensive as thought when it came to making a claim.

In a recent example of anti competitive behaviour, the Competition and Markets Authority, (CMA) have fined CompareTheMarket nearly £18 million pounds for breaking competition law. An investigation by the CMA found that CompareTheMarket imposed clauses on home insurers that barred them from offering lower prices elsewhere. The CMA highlighted that, as a result of this, competition between price comparison websites, and between home insurers selling through these platforms, was restricted which is likely to have resulted in higher insurance premiums.

A Price Comparison website should be used as an instrument of research and not relied upon solely when buying insurance. Remember how they work. Use our site to help verify and reinforce your findings, before buying insurance.