First published in ITIJ 122, March 2011
Millions of consumers use price comparison websites to find – and find fast – what they hope will be the right travel insurance policy at the right price. But do the sites give users a broad and impartial view of the market? It’s a question to which the industry and financial watchdogs have yet to provide a clear answer, says David Kernek
‘Let the buyer beware’ was sound advice for the Romans 2,000 years ago, and it’s crucial today when online buying, which – while sometimes efficient and fast – means we can’t see and talk to the people with whom we are doing business. The point was illustrated recently by Stuart Bensusan, head of sales at Essential Travel, when he questioned the transparency of travel insurance price comparison sites. What he described as ‘guerrilla marketing’ by price comparison sites had, he believed, led online buyers to believe they save money searching the entire policy market to find the lowest prices.
“Companies on these so-called ‘money saving’ websites,” he said, “are operating under several trading names, so while a top-ten search gives consumers the impression they are viewing a range of prices from ten different providers, in reality the 10 insurance ‘brands’ displayed are actually owned by a small pool of three or four companies. In some cases, it’s as few as two separate providers.”
Essential Travel conducted a test search for cheap travel insurance policies on the Gocompare website, and reported that the top ten quotes generated were supplied by only two different companies. On CompareTheMarket, the top-ten quotes were offered by three different providers. Based on this information, says Essential Travel, if consumers were to buy a policy from the Gocompare selection, there is an 80-per-cent chance that they will purchase a policy from Drakefield Insurance, and a 20-per-cent chance of buying from Citybond Insurance.
“If [customers] are being given variations of the same company's offerings that's not really competitive and certainly not transparent.”
On CompareTheMarket, customers get a 60 per cent chance of buying Rock Insurance cover, and a 30 per cent chance of setting off on their travels with a Blue Insurance policy in their bags. “Where’s the comparison in that?” Mr Bensusan asked. “Consumers need to be wary of websites claiming to offer an overview of prices across the whole market.”
Through the looking glass
His comments are echoed by Dan Moore, a senior money researcher at Which? magazine. “Customers who reach the results page expect to be presented with a range of potential policy providers that they can compare,” he says. “If they are being given variations of the same company's offerings that's not really competitive and certainly not transparent.”
Requesting quotes for a middle-aged couple with no adverse medical conditions wanting worldwide, annual multi-trip cover, I ran sample tests on four of the leading comparison websites – Moneysupermarket, Comparethemarket, Confused and Gocompare. My results were similar, though not identical, to those of Essential Travel’s.
The Confused website generated a list quotes from ten trade brands ranging from Top Dog Insurance to getmy.com. Prices started from £59.95 and ascending to £250, with varying levels of excess and cover for baggage, cancellation and medical costs. But only consumers with time, patience and perhaps curiosity would have discovered that of the ten different and brashly-named brands – including protectyourbubble.com, Flexi Cover Direct and etravel – five were offering Axa policies. I was given 37 quotes by comparethemarket.com, starting from £60.70 at insurefor.com and climbing steeply to Avanti’s £787. In the top ten, there two quotes from insurefor.com, and two from protect your bubble.com. Moneysupermarket gave me an indigestible list of 173 quotes, with insurefor.com taking four spots in the top ten list of lowest prices, and Protect your bubble getting three.
The criticisms made by Essential Travel’s Stuart Bensusan are refuted by Gocompare. “The Essential Travel report provides a very unbalanced view of the travel comparison industry,” says Jeremy Cryer, head of travel at Gocompare. “The report claims that the top ten quotes returned were from only two insurance providers, which is extremely unlikely and could happen only if you used a very niche, specific risk – for example, if you ran a quote for a trip that included a specific hazardous activity.
“As they did not outline the risks they used for the report, we ran a series of quotes and found that a number of different underwriters regularly returned quotes in the top ten results. The Gocompare travel comparison currently compares 25 different travel insurance products. While some of these are underwritten by the same insurer, they will each have different levels of cover, and will be targeting different risks, so each product is different.” Mr Cryer added that Essentialtravel.co.uk, part of the RBS-owned Thomas Cook group, was on the panel of travel insurance providers from which it draws it quotes.
What, then, is the nature of the relationship between the comparison sites and the companies whose various brands provide them with quotes, and can it be said to shape the selections presented to potential buyers? Do the sites make clear to users how they operate, and can the claims they make for their market coverage be trusted?
Whether there are users who believe that the sites operate along the same lines as Google is open to conjecture – I suspect there are a good many – but it’s a fact that the aggregation business is a highly competitive one. The total advertising spend of Britain’s five leading sites exceeded £85 million last year, with rivalry extending to Gocompare complaining (unsuccessfully) to the Advertising Standards Authority in 2009 about cost-saving claims made by Moneysupermarket. As with any other branch of commerce, there’s no such thing as a free lunch, or in this case, quote.
What, then, is the nature of the relationship between the comparison sites and the companies whose various brands provide them with quotes?
Their revenues come from the insurance providers who supply their quotes and policy information. ‘Affiliates’ can pay for a range of benefits: their products might be included in best-buy tables or come up on the screen with contact information not afforded to non-affiliate providers. The basic payment method is through commissions per click or purchase.
Down the rabbit hole
Users who take the time to drill down beyond the quotes list to the ‘about us’ sections will reach their own conclusions as to whether or not the selections they are given are impartial, and whether that matters to them. The jury appears to be divided: a Quidco survey of online shoppers reported that 50 per cent of consumers would be worried about using comparison sites if they suspected a lack of impartiality; a Which? survey found that only one in five consumers trusted the sites; while a study by Consumer Intelligence found that for a significant minority – 40 per cent – the reason for not using them was not lack of trust and doubts about impartiality, but instead anxiety about being harassed by follow-up phone calls, e-mails and letters from insurance company sales staff.
A 2010 Office of Fair Trading (OFT) investigation concluded that the operation of comparison websites was acceptable, saying that a majority of respondents surveyed were aware that commission was paid by insurance providers, and knew therefore that the sites were not covering the entire market. But a large minority – 38 per cent according to Direct Line, which has no truck with aggregators – do not know that the sites are funded by commissions, some believing they are, like Google, free information services.
The Financial Services Authority (FSA) has reviewed the sector three times since 2006. Its third report, in 2008, cleared them of product bias charges. “Our findings showed that the provider rankings are based purely on price and are not affected by commissions received by the aggregator.” It also noted that websites “appeared to be maintaining a high degree of accuracy and up-to-date information”. It did, however, say it expected website companies “not to give a misleading impression of their market coverage.” How do the sites go about meeting the FSA’s not unambitious expectations?
Moneysupermarket prominently promises to “compare more than anyone else … over 450 policies … compare travel insurance quotes from more than 80 UK brands.” Users interested in how the site works would have to go – oddly – to the Investor Relations page, where they would learn that “our revenue comes predominantly from fees paid to us by product providers and advertisers either when our customer clicks through to their website or … actually applies for or purchases a product.”
“Trying to bring many of these people together felt like herding a group of angry cats.”
On its About Us pages, Confused states unambiguously that it is owned by the Admiral insurance group, but tells users that it is operated as an independent business. Not only does it not favour Admiral products, but, “we have in place conflict of interest measures that prevent any cross-over between Confused’s service and that of other Admiral Group companies ... our quotes are ordered according to price, not affiliation.” It says the site compares a ‘wide range of trusted household names’ and ‘gets a small fee from the providers we do business with if you decide to buy their product or service’. The site includes a separate section listing the names of all the insurance brands with whom it does business, and the names of the companies that own them.
Gocompare’s About Us pages says the site works with a ‘range of trusted insurance providers’ to give ‘real breadth of coverage across the marketplace’. Its revenue comes from ‘charging our partners a small fee once a sale has been made’. The small print on Gocompare’s travel pages “introduces customers to QuoteBanana, our preferred provider for travel insurance”. This means that the selection presented by Gocompare is in fact provided by QuoteBanana, which users are informed is “administered by Drakefield Insurance Services Limited”. Drakefield – ‘Treating people fairly’ is its corporate mantra – is a subsidiary of the holding company that also owns the Saga holidays and insurance company and the Automobile Association.
Consumers are told by Comparethemarket that it searches ‘in seconds’ for quotes ‘from 17 leading travel insurance’ and boasts of “quote to cover in less than four minutes – what could be simpler?”, although it’s not clear if that includes time spent comparing the main features – excess, medical costs, baggage, scheduled airline failure etc. – of the various policies offered. It also tells users: “When you are looking for insurance, you don’t necessarily need to know all of the finer detail about the insurers you are comparing … all you really want is to be confident that we will provide a price comparison from a wide range of the UK’s top providers.” Comparethemarket lists its providers for home, car, van and bike insurance, but there is currently no list of travel insurance companies.
The About Us pages at both Gocompare and Comparethemarket are straightforward about their market coverage. They tell users – albeit in somewhat low-key tone – that not every provider has ‘chosen’ to work with them, and they both cite Direct Line as a non-joiner. “Brands such as Direct Line prefer to sell direct to the public and others prefer to sell via a broker,” says Comparethemarket, while Gocompare also namechecks Aviva as a company whose products can’t be bought through comparison sites.
Why has Direct Line consistently refused to partner with the aggregator sites? There’s a big clue, says DL’s head of travel insurance Tom Bishop, in the name. “The company was created specifically to sell not through brokers but directly to consumers. In a way, the price comparison sites are the brokers of the 21st century, but at least with the old middlemen it was somebody who could talk to a customers, look at the fine detail of what a customer needed and make sure they got the right policy.
"We don't pay commission to the websites, so the money we save can be passed on to customers in the form of high-quality cover that's tailored to their different needs. That's not always easy or possible with the comparison websites.” He added: “There's a difference between cheap and cheerful and cheap and nasty. When you see very low quotes, you have to ask yourself what you are getting. Many of them might be fine if you're young and fit with no medical history but, sadly, how many of us can make that claim? The problem is that the vast majority of the public never know what a good policy is until they have to make a claim.” He says there needs to be more education about comparison sites. “They’re not like Google or flight price sites that search the entire market. They're aggregators, presenting quotes from providers with whom they have payment arrangements, either by clicks or sales.”
The FSA appears to be happy with the way the sites operate, so statutory regulation is unlikely. An attempt by the Comparison Consortium to get the major players to sign up to a voluntary code of conduct collapsed last year. “Trying t0 bring many of these people together felt like herding a group of angry cats,” said Sean Gardner, a former managing director of the Moneyexpert.com and head of the now defunct consortium. “It is hard to avoid the conclusion that many consumers will continue to be misled. It is immensely frustrating.”
getting the cover that’s just right might take a little longer than the four minutes promised by comparethemarket.com
The sites, I think, could take a modest step towards greater transparency by printing the names of the brand-owning companies alongside the flashy logos on their quote selection lists, and by stating explicitly the extent of their market sweep more prominently.
Failing that, users would be well advised to not only find out what the comparers come up with, but also to go to insurers that do not subscribe to the sites … and that means getting the cover that’s right might take a little longer than the four minutes promised by comparethemarket.