Price comparison sites examined
In a thematic review published in July, the Financial Conduct Authority (FCA) found that price comparison websites did not always ensure that consumers were given the appropriate information to help them make informed decisions. This is particularly important as the FCA is concerned that consumers’ focus on headline price and brand when using price comparison websites could distract from crucial product features such as policy coverage and terms. By failing to provide clear information, the websites are increasing the risk that consumers may buy products without understanding key features such as level of cover or excess levels and focus purely on the price. While a few websites did provide this information clearly, the level of clarity varied significantly depending on the provider.
Clive Adamson, FCA director of supervision, said: “Price comparison websites have increased in popularity among consumers with an estimated one third of consumers buying their motor insurance policy through them. They provide an important service for millions of consumers bringing convenience and simplicity to buying financial products online. However, our review found that they were not meeting our requirements in delivering fair and consistent outcomes for consumers. We also found, through our consumer research, that consumers had a number of misconceptions about the services they provided.” He added: “We expect price comparison websites to take on board the findings of the review. It is also important for consumers to understand that not all products are the same and the cheapest product may not always be the best for their needs.”
The other key findings of the FCA’s review were:
- Price comparison websites did not make clear their role in the distribution of the product or the nature of service they provided. For example, some consumers mistakenly believe that the price comparison website had provided them with quotes on the best policy for their individual needs and had assessed the suitability of the policy for them.
- Not all comparison sites that were part of a larger group of an insurer or broker disclose this potential conflict of interest, which is against FCA rules. However, the FCA found no evidence that these firms used this relationship to their commercial advantage.
- While some price comparison websites had taken steps to comply with their regulatory obligations they had failed to fully implement Guidance published in 2011.
The FCA has asked price comparison websites to take action on the specific areas identified where they are not meeting the required standards to ensure customers get a product that meets their needs.
Following the FCA’s review, which found some price comparison websites operating in the general insurance sector are failing to meet consumers’ expectations of them and in some cases the FCA’s regulatory standards, Michael Ward, managing director of PayingTooMuch.com, said: “We certainly support the FCA’s review, in particular the concern that consumers are focused on headline pricing and brand, distracting them from crucial product coverage and terms. With travel insurance, the cheapest policy is no good if people do not disclose their pre-existing medical conditions when buying as this can result in serious disappointment at the time they need to claim. PayingTooMuch will not provide travel insurance unless full disclosure is made and will not knowingly allow customers to buy policies without their medical conditions being included. We and they will want them to have a policy that will pay out and give them a true feeling of security.”
The British Insurance Brokers’ Association (BIBA) is urging the Financial Conduct Authority (FCA) to take firm action to ensure that price comparison websites are complying with the FCA’s regulatory standards, and said that it is ‘not surprised by the findings’ and has long called for the regulator to ensure that customers are receiving the right outcomes. In its 2014 Manifesto, it outlined a number of issues that need to be addressed, including how information is presented to consumers, the focus on headline price, making sure the consumer is at the heart of a firm’s business and a ban on anti-competitive Most Favoured Nation clauses.
BIBA’s chief executive Steve White commented: “We are pleased that the FCA has reviewed this important area and we are not surprised by the findings. We now want to see the FCA drive home the recommendations that it made in 2011 and ensure that these are complied with. We are keen to continue to work with the FCA and comparison sites to ensure that customers have appropriate protection. A level playing field is needed to ensure that consumers receive the same protection wherever they purchase their insurance.”
BIBA’s executive director Graeme Trudgill added: “Our member insurance brokers have highlighted the issues with comparison websites for a number of years. We initially raised concerns in 2008 because we identified that there was a gap developing between the pace of technological change and the regulations, which were written in 2005. We are pleased that the FCA and the CMA are dealing with these issues. Gocompare.com is still the only comparison website to be accepted as an associate member of BIBA. We have developed a positive working relationship with their team as we believe they operate a best practice approach to insurance comparison.”
David Sparkes, BIBA’s compliance and training manager, concluded: “The FCA research showed consumers mistakenly believe Price Comparison Websites are ‘Product Comparison Websites’ as well, which is not the case, so more needs to be done to deliver to customer expectations here. We have five points outlined in our Manifesto and will continue to push for these to be addressed.”