In May 2008 we published the findings of our desk-based review into general insurance comparison websites:
Review into general insurance comparison websites - May 2008.
At this time, we noted the significant growth in these websites and the number of consumers using them - in 2007 almost 25% of all private motor insurance was sold through an aggregator site, with some 30 million motor quotes generated in the process1.
We welcomed this innovation and the resulting increase in competition, but were determined to ensure that customers were treated fairly in this rapidly expanding sales channel.
As part of the second stage of the review, we visited a number of firms, which represented over 50% of the market in terms of sales volume. The objectives of the visits were to:
- check whether consumers were being treated fairly and, in particular, whether information provided to consumers was clear, fair and not misleading;
- follow up on the findings of the previous project, and determine whether firms had taken appropriate action following the publication of our good and bad practice guide in May; and
- determine whether there were any other regulatory concerns inherent in the way these websites operate.
We found that many firms had made significant improvements and are consistently providing clear, fair and not misleading information. However, we identified certain areas where firms need to go further to address a few specific concerns:
- Obtain better information from insurers about the level of excesses that apply to insurance policies; and
- Make clearer the assumptions about consumers' needs and circumstances that some websites use to obtain quotes.
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Excess levels
Firms were generally showing the level of excess on each quote but in most cases firms were unable to show the split between compulsory and voluntary excesses - often because the relevant information had not been supplied by the provider.
Where this information is not available from the provider, this should be made clear to the customer. We also expect aggregators and insurers to work together in making this information available.
Assumptions
Insurance aggregators make assumptions to generate quotes quickly. In the area of motor insurance, examples of such assumptions in relation to the main driver and/or the vehicle are that the applicant is the main driver of the car and not a professional driver; that the applicant has been driving regularly since the date that his licence was issued, or that the vehicle is not a van or commercial vehicle and is not used for hire, trade or delivery.
Where assumptions were made, they were not always set out clearly. For example, some firms were hiding away assumptions within the 'small print' of the firm's 'Terms and Conditions'. We expect firms to make sure that any assumptions are clearly and prominently signposted on their websites and at all relevant stages of the customer's online 'journey'.
Accuracy of quotes information
Firms appeared to be maintaining a high degree of accuracy and up to date information on their sites. Generally, systems and controls appeared to be robust with regular monitoring in place to ensure aggregator quotes match those of 'direct' insurer quotes.
Product bias
We also looked at whether the product provider ranking on the quotes tables could be affected by commission levels. Commissions may be earned by the aggregators either by the 'click through' process or if the consumer goes on to purchase the product. Our findings showed that the provider rankings are based purely on price and are not affected any commissions received by the aggregator.
Disclosure
The Insurance Conduct of Business Sourcebook (ICOBs), requires firms to make certain disclosures on paper or in any other durable medium available and accessible to the customer prior to the completion of the insurance contract. The information should also be communicated in a clear and accurate manner, comprehensible to the customer. The majority of firms made such disclosures within their Terms and Conditions, which were accessible on their websites. Some firms chose to send an Initial Disclosure Document (IDD) to customers or make this document available to download from their websites.
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Customer data sold to third parties
The issue of obtaining revenues from the sale of customer data to third parties and whether this has to be disclosed by firms to their prospective customers was raised during the visits. We think that this issue falls primarily within the remit of the Information Commissioner's Office and we have referred it to the Commissioner for consideration.
Accuracy of advertising information
In addition to the visits, we carried out a desk-based assessment of aggregator press, online and TV advertising over a two-month period (August 2008 to October 2008). In the vast majority of cases, we found firms had clear, fair and not misleading adverts. However, in a small number of cases, we found a lack of clarity in some of the terms used to describe potential price savings, and adverts which could be misleading about market coverage and other benefits offered by the firm.
In particular, we had concerns with unclear terms, for instance, that consumers could save on average £xxx. This could create the misleading impression that most consumers could be eligible for this saving.
We also had concerns with adverts that could give consumers an unrealistic expectation of an aggregator's market coverage or of other benefits of using an aggregators' service, such as lower prices for insurance.
As we stated in May2, the overriding principle for firms to comply with is that the information provided to consumers must be clear, fair and not misleading. We have published good and bad practice on our website to assist firms in meeting our expectations3.
To comply with this principle, and in relation to this review, firms must:
- ensure that any assumptions about the customer used to generate quotes are clearly and prominently displayed on the website and at all stages of the consumer's online 'journey' so that the customer is aware of these assumptions;
- provide clear and accurate details about policy excesses;
- ensure that any statements in their advertising and communications material are factually correct, accurate and up-to-date;
- avoid creating adverts that give consumers an unrealistic perception of the market coverage of the aggregator;
- ensure any price/savings claims in their advertising are meaningful to the target audience and a fair representation of what they can be expected to receive.
We have written to all the firms involved in the visits with detailed feedback on our findings. We have also written to the other firms reviewed in May with general feedback on our findings. We expect all insurance aggregator firms to take prompt action to meet our overall standards and our requirements to be fair, clear and not misleading. We will keep these websites under review to ensure they take steps to meet the standards we expect, and will take direct action if firms fail to do so.
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Footnotes
1 Datamonitor, Aggregators in UK General Insurance 2008: A Growing Force (Examining the UK Market for Insurance Aggregators), March 2008.
2 Review into general insurance comparison websites - May 2008
3 Examples of good and poor practice in general insurance comparison websites
