I never thought I would live to see the day when I would welcome a thematic review by the regulator, but news that the Financial Conduct Authority has launched a thematic review of price comparison sites brought a smile to my face.
The FCA wants to ensure that consumers are being encouraged to make the right choices and ensure that they have all the relevant facts to buy with confidence. It has pledged to include 14 websites (representing 90% of the price comparison market) focusing on the motor, travel and home insurance sectors as the most popular price comparison insurance products.
I’m all for healthy competition and believe it is absolutely right that consumers have choice as to how they research and purchase their insurance requirements. This is why I’m delighted at the news of this review.
A recent report published by independent research organisation, the Resolution Foundation, found that 30% of prices quoted on many of the price comparison sites were wrong, which is at best sloppy but at worst misleading.
Insurers are being forced into using a range of ever more sophisticated mechanisms in order to manipulate their positioning on these platforms. Some design specific products to simply grab the headline rate – what are referred to as ‘skinny’ products but which are, in reality, stripped down commodity products that lure the consumer in with the promise of a cheap rate only to load the premium further down the line with a range of optional ‘extras’ that better quality products include as standard often for little more than their skinny counterparts.
Where’s the transparency in this practice?
Worse still, it is likely that the consumer doesn’t really know what they’ve bought particularly as default answers are often pre-entered to make the quote-apply process quicker. For example, Moneysupermarket.com defaults home insurance criteria to “occupied during the day” which significantly reduces risk. And not all information entered in to a site is carried through to the insurer’s site making it imperative that the consumer checks they have the cover they require. With all due respect to consumers (I am after all one of them), what percentage is likely to do this?
This could lead to a consumer thinking they’re insured, only to find out that they’re woefully under-insured when it comes to making a claim.
I dread to think how many homeowners are sitting down with a well earned mince pie and glass of mulled wine after a hard day’s Christmas shopping that has temporarily added a few hundred pounds to the value of their total contents, blissfully unaware that their stripped down ‘value’ household cover doesn’t automatically increase contents insurance during the season of good will.
With burglaries increasing by almost a quarter during the winter months, they may turn to a stiff whisky when they find out these gifts aren’t covered if their home is broken into.
And for those who may be lucky enough to get one of the latest gadgets in their Christmas stocking only to lose it or have it stolen while they’re on the daily commute, it could all end in tears if their household insurance doesn’t cover items away from the home.
I truly hope that the FCA uncovers these practices in its review for the sake of your clients, but in the meantime it is our duty to educate them. The good news is that there is a growing disillusionment among those of the public who have seen through some of the more spurious practices of these firms so despite the mega advertising budgets of the meerkats and opera singers, intermediaries have increased their share of the household insurance market.
There are dark arts at play with the price comparison sites that consumers are not aware of. This is an issue that I intend to pursue vigorously so expect to see more from me on the subject over the coming months!