Insurance Brokers Or Comparison Websites? Who is Treating Customers Fairly?

There has been a rapid increase in the number and use of comparison websites for general insurance, as well as for consumers who use them for products like motor and home insurance. According to industry figures, almost 25% of private motor insurance was purchased through these websites in 2007.

Is the intense competition among Internet buyers leading to poor selling? After research by the British Insurance Brokers Association (BIBA), the Financial Services Authority (FSA), a review of price comparison sites was initiated by the Financial Services Authority. This was in response to concerns that there could be serious consumer harm. A majority of the 84% of those surveyed said that details of insurance policies available through price comparison websites could be confusing. FSA took a look at the market to see if insurance comparison websites are treating customers fairly. It also examined whether information provided to consumers was clear, fair, and not misleading. The results revealed several flaws:

Warnings and prompts: Comparative websites that include warnings or prompts may not always give consumers enough information to make an informed decision. One case in which the applicant was told that certain assumptions were used to generate an insurance quote, but they are not available for review.

Unfair Excess – A Key Pricing Feature: Whether you believe it or not, the price is often the most important purchasing factor. In order to determine whether a premium quoted is competitive, it is important to know how much excess has been paid. This information should be provided by price comparison websites that are “clear, fair, and not misleading”. There were instances where excess was stated as a total, but it did not include the mandatory excess. Other cases showed substantial errors in the information regarding the excess.

Base of Comparison: While comparing products should be the core of what insurance comparison websites should strive to do, they have had varying degrees of success. Sites compare only a small number of product features. In particular, if price is the only factor considered, consumers should be informed promptly.

  • You should also consider other features.
  • There will be many features listed on the products, not all of them. These may differ greatly.

This information was only provided by a few firms. It was often embedded in small print when it was provided.

Information accuracy: Companies should have systems in place that ensure the information they give to customers is accurate, consistent, and up-to-date. Many price comparison websites provided inaccurate or outdated information or did not provide the same level information for all policies. The result was that the user could be misled into believing that certain features of the policy were missing. These instances were also found when the quote provided by the comparison site was different from what the broker or insurer actually charged.

Systems and Controls for Checking Consistency of Information. Companies should have systems in place and controls to verify that information is being relayed correctly to the broker/insurer. One instance showed that the information was not being correctly relayed.

A spokesperson for British Insurance Brokers Association commented on the findings. He said that while he was happy the FSA asked for price comparison websites to provide more information to consumers, but that they should go further. “Like brokers,” he stated, “Comparative sites should guarantee their quotes.” He noted that the FSA had stressed the importance and value of getting advice when buying insurance. He suggested that consumers call a broker to obtain this advice. This will ensure that they get the right coverage at the right price.

The FSA’s review clearly revealed some serious flaws. Insurance brokers are used to comparing clients’ policies. However, they also use their market knowledge and expertise to make balanced recommendations that take into consideration price, policy coverage, and customer service levels. It seems that the message is to use caution when comparing websites and instead, consult a licensed insurance broker.