COMPARISON websites – companies which provide basic information to consumers about products and services available in the marketplace – have been a hugely innovative development in recent years.
In the insurance market, they have enabled the public to compare numerous products in a short space of time.
But are consumers using the information to make the right choices when buying insurance? Or they being put at a disadvantage?
The Bri
tish Insurance Brokers' Association (Biba) has called on the Financial Services Authority, the industry regulator, to review the rules governing these sites.
When the FSA created the rules for the selling of general insurance in 2002-3, comparison sites were still in their infancy and so were not on its regulatory "radar". But their subsequent rapid proliferation has left many in the industry concerned that the rules do not sufficiently reflect the electronic world in which we live.
Independent research into price comparison websites has identified several concerns, including:
• More than half of insurance buyers interviewed do not fully understand the differences between policies offered via comparison websites.
• Only 6 per cent of insurance comparison website users believe that the details of what the policy covers and does not cover are explained fully.
• Some 84 per cent of insurance buyers said that the details of insurance policies offered via price comparison websites can be confusing.
&149 Some 93 per cent of consumers expect insurance comparison websites to be regulated in the same way as insurance intermediaries.
The research also found that many price comparison sites use assumptions as the basis of their quotation which could lead to consumers purchasing a policy which is not appropriate for them. For example, when buying home insurance, some sites assume that the property in question is not used for work at all, including the contents. This restriction seems unduly harsh given the number of people who work from home these days.
And with motor insurance quotes, some sites assume that the person buying the cover is the main user of the car, when it could easily be their partner.
These assumptions mean that consumers could end up buying an unsuitable policy, or that the original premium quoted by the comparison site is massively underestimated compared with the quote from the insurer.
The really worrying thing about assumptions is that a third of insurance buyers are unaware that some comparators even make them.
Customers must have a suitable insurance policy with appropriate cover. What we need to see are minimum standards across the industry where a consumer can go to any regulated seller – insurer, broker, or a comparison site – and get consistent information to help them make an informed buying decision. There should be a level playing field for all; comparison sites should play by the same rules as everyone else in the insurance industry.
Brokers are professionally trained to help, but Biba fears that there are still too many people logging on and making a decision solely based on the price of a policy, rather than the protection it offers.
Biba has welcomed the constructive comments received in response to our concerns from many comparison sites and we will work with them to find a suitable solution to this problem.
In the meantime, we would urge the public to get a second opinion from a regulated insurance broker who will ensure that their customers purchase suitable policies at a good price.
• Graeme Trudgill is technical and corporate affairs executive at the British Insurance Brokers' Association.
&149 Biba consumer helpline 0870 950 1790; find a broker at:
www.biba.org.uk