The Financial Conduct Authority (FCA) has recently urged caution from consumers using price comparison websites. Despite widespread promotion of these types of sites, the FCA has found that many are not meeting consumer expectations.
Fees
If a price comparison website fails to adhere to or reach basis industry requirements, they could receive a fine, or at worst, be shut down.
The FCA has discovered that one of the major issues with these sites is that they do not always compare like for like products. For example, insurers have been seen to offer a competitive price against a policy from a competitor, when in reality, features such as cover are less adequate. Therefore, consumers opting for the cheapest deal will not receive the same benefits as those offered in the competitor choice.
Money expert Annie Shaw explains that, ‘websites also make their money by referring customers to the insurers in exchange for a fee.’ This, Shaw suggests, means that they, ‘could easily be tempted to give prominence in their search results to firms that are offering the biggest referral commission.’[1]
Shaw said that this method could see websites leaving out insurers, ‘who don’t want to pay their fees but who could be offering the best deal for the customer.’ She added however that, ‘the good news is that the FCA is going to be cracking down on the comparison site firms and asking them to make changes.’[1]
Rules
For consumers utilising price comparison websites, there are a few key rules that if followed, will greatly ensure the best deals are found. The rules are as follows:
Be cautious of special offers
These could come in many forms, such as ‘best buys’, ‘editor’s’ choices or ‘last chance to buy.’ While all of these types of deal should still be considered, consumers should be wary that they might just be heavily promoted as a result of referral fees.
Compare like for like
Although similar products may arise following a specific search for insurance, one may have a low premium but a high excess charge. Shaw remarks that, ‘the lower the premium, the higher the excess is the usual rule of thumb.’[1]
Cheaper may not mean better
An insurer may have low premiums as it has had a poor track record of responding fully to claims. Additionally, an insurer may be raising additional funds by making customers call a premium rate number.
All may not be as it seems
Shaw warns that, ‘comparison sites try to make your application as easy as possible, so that you go on to buy and don’t get put off by lots of niggly questions at the start of your application.’
‘That means that the site may not ask you for enough information to give you an accurate quote.’[1]
Look at more than one site
Consumers should always use more than one comparison site. Different sites will include alternative deals and offers.
It is important to remember that comparison sites only indicate a guide to what is on offer in the market. In addition, some larger insurers will not appear on comparison sites.
[1] http://www.saga.co.uk/money/news/2014/july/what-you-need-to-know-about-insurance-comparison-websites.aspx