There has been significant growth in both the number of general insurance comparison websites, and the number of consumers using these sites, in the last few years. This is particularly true for general insurance products, such as motor and home insurance. Indeed, recent figures1 suggest that almost 25% of all private motor insurance sold in 2007 was "aggregator-instigated". In addition to this, the research also suggests that these sites generated approximately 30 million private motor quotes in the same period.

We previously considered the growth of these sites in 2006 and 2007 and concluded that no immediate action, other than to follow the development of the market, was required. However, in light of a number of factors, including the continued strong growth of the market, the addition of a number of new entrants into the market, and the BIBA (British Insurance Brokers' Association) research suggesting there are significant issues within the market, we have recently carried out a further review of the market. This review took a snapshot of the current market, to determine whether these sites are behaving in a way which treats customers fairly, and in particular, whether the information provided to consumers is clear, fair and not misleading.

The purpose of this communication is to present the findings of our review, and to provide clarification of our expectations of this industry.

What did the review entail?

We followed the "customer journey" on 17 insurance comparison websites, from the provision of personal information and the receipt of quotes, through to purchasing the insurance from the broker or insurer's website. The purpose of this was to test a number of elements in the chain of purchasing insurance, and to gain a clear understanding of the types of information that consumers are provided with at various stages of the purchase.

In particular, we focused on whether:

  1. The websites we reviewed have appropriate authorisation to undertake the activities they are performing; and
  2. Whether the information provided to consumers was clear, fair and not misleading, including whether the information was accurate when compared to the information available on the brokers' and insurers' websites.

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Conclusion

A. Authorisation

The first issue we considered was whether firms are appropriately authorised to undertake the activities they are performing. In this regard, any firm giving advice or introducing other firms' products must be regulated by the FSA. Of the 17 sites reviewed, all were authorised by the FSA. The level of permissions for these firms varied from Introducer Appointed Representatives, through to firms which were fully authorised for insurance mediation, advising and arranging on general insurance. Our review did not highlight any concerns with the levels of permissions held by those sites we reviewed.

B. Clear, fair and not misleading

The second point considered is whether the information provided to consumers is clear, fair and not misleading. Those insurance comparison sites that demonstrated best practice tended to have a high level of functionality in their websites. For example, a number of the websites reviewed provide a granular level of detail on the various features of different insurance policies.

Use of warnings and prompts

A number of firms provide consumers with key information about the products and services available from the site, or the basis on which quotes are provided, before providing consumers with the full list of quotes. By alerting consumers to the fact that they need to consider factors other than price, consumers are more likely to be able to make a judgement on whether the price quoted is acceptable, taking into account other relevant factors.

However, we also reviewed sites that contained warnings or prompts, but didn't provide consumers with sufficient information to act. For example, in one case, we were advised that assumptions had been used to generate the quote, but were not given the opportunity to review them.

Clarity around levels of excess

We are aware that consumers are price-sensitive and therefore price will be a key factor in the purchasing decision. In light of this, it is our view that the level of excess is likely to be a key factor in determining whether a quoted price is acceptable. For this reason, to the extent that sites provide information on the level of excess, we expect that information to be clear, fair and not misleading. For example, the review highlighted cases where the excess was given as a "total" but in fact excluded the compulsory excess. There were also cases where the information provided on the level of excess was substantially incorrect.

The basis of comparison

Providing the ability to compare products is at the heart of what insurance comparison sites are trying to achieve. However, our review highlights that sites are achieving this with varying levels of success.

Whilst it is our view that price should not be used as the only comparison factor in products such as insurance, we accept that the basis of comparison is one of the key features insurance comparison sites use to differentiate themselves from their competitors. Therefore, to the extent that sites only compare a limited number of product features, and in particular where price is the only feature considered, consumers should be given a clear and timely warning that when deciding which policy to purchase, other features should also be taken into account, and that the products listed will have different features (not all of which are listed), which may vary greatly. Of the websites reviewed, only a small number of firms provided this information. Where it was provided, it tended to be embedded in the Terms and Conditions. We would expect this to be given more prominence on the website.

Accuracy of information

We expect firms to have systems in place to ensure that the information they provide to consumers is consistent, correct and is updated as necessary. For example, a number of the websites reviewed provided incorrect or out of date information, or failed to provide the same level of information for each of the policies listed creating the misleading impression that certain policy features were not provided in the policy. We also identified instances when the quote given by the comparison site differed from the amount actually charged by the broker or insurer. Such incorrect, or out-of-date information could be misleading to consumers.

Systems and controls to check consistency of information

Whilst we were encouraged by those firms that prompt consumers to check that the information provided to the broker or insurer is correct when going through to their site, we also expect firms to have systems and controls in place to test whether the information is being correctly relayed to the broker or insurer. The review identified one instance in which the information was not correctly provided by the insurance comparison site to the broker or insurer.

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What we would expect to see

Key points for insurance comparison sites

The overriding principle for firms to comply with is that the information provided to consumers must be clear, fair and not misleading. In particular:

  • Where an insurance comparison site uses assumptions to generate quotes, we expect any assumptions made to be reasonable, and clearly highlighted to consumers;
  • Sites comparing a limited number of features, and in particular where comparison is only on the basis of price, should explain to consumers in a clear and timely way that the products being compared may have different features, and that features, other than price, should be taken into account before purchasing a policy;
  • Firms should have processes in place to ensure that all information provided is correct and updated on a regular basis. This includes an expectation that firms will have systems and controls in place to ensure that the information provided by consumers is correctly relayed to the broker or insurer.
  • Firms should take a consistent approach to the provision of information, and the basis for providing certain pieces of information should be clearly explained to the consumer;
  • Firms should not give a misleading impression of their market coverage. 

Key points for brokers and insurers:

We would also remind brokers and insurers of their obligations. Consumers should be provided with appropriate information about a policy in good time and in a comprehensible format, so that they can make an informed decision about the purchase of insurance. For example, in one case neither the broker nor insurer provided any information on the coverage or features of the policy before the conclusion of the contract. In this case, the consumer would only obtain information on the policy after committing to it.

In addition, in the event that the consumer decided that the policy was unsuitable, they would need to seek a refund of the premium from the broker or insurer, which would be subject to an administration fee. In another example, the onus was placed on the consumer to check that the information provided to the broker or insurer by the comparison site was correct, but this information could not be viewed on the broker or insurer's website. Again, any mistakes could only be rectified after the conclusion of the contract.

Next steps

We expect all comparison sites to review their websites and make the necessary changes to ensure that they are clear, fair and not misleading. We will be following up the website review with a series of thematic firm visits to test whether individual firms are meeting our expectations.

We have also drafted a set of consumer messages which identify the key factors consumers should consider when using general insurance comparison websites:

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1. Datamonitor, Aggregators in UK General Insurance 2008: A Growing Force (Examining the UK Market for Insurance Aggregators), March 2008.