What you need to know about insurance comparison websites

Annie Shaw / 25 July 2014

Money expert Annie Shaw on why comparison sites may not be all they are cracked up to be.



How many times have you read that you should be using a comparison website to find the best deal on your insurance?

We’ve all seen the meerkats and the opera singer on TV trying to sign us up for comparison site services. They sound like a brilliant idea – and in many ways they are.

You enter your details and the website does all the work of looking at all the deals on offer and finds you the best one, saving you hours of phone calls and mathematical calculations.

Except that now, it seems, they don’t. The Financial Conduct Authority, the City watchdog which makes sure financial firms are behaving properly, has found that some websites are “failing to meet consumers’ expectations of them”.

Failure to meet regulatory requirements could, in the worst cases, get them fined or shut down.

So, what’s wrong with them? One of the big problems is that they don’t always compare like with like.

An insurer may be able to charge the keenest price on a policy for the very good reason that its cover is less comprehensive, or even inadequate, compared with one that without close inspection looks the same.

The cheaper one is therefore not exactly a good deal.

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The websites also make their money by referring customers to the insurers in exchange for a fee, so they could easily be tempted to give prominence in their search results to firms that are offering the biggest referral commission.

This could also lead them to leave out insurers who don’t want to pay their fees but who could be offering the best deal for the customer.

The good news is that the FCA is going to be cracking down on the comparison site firms and asking them to make changes.

Meanwhile, if you want to use a comparison site before the industry gets the all-clear – and there is no doubt that they are useful for indicating what’s generally on offer in the market –  you should observe a few simple rules:

Beware of the special offers. As well as “exclusives” they may also be heavily promoted as “best buys”, “editor’s picks” or “popular” choices. Consider them by all means, but just be wary that they may be at the top of the list because they are paying the website to promote them.

Make sure you are comparing like with like. A policy with a low premium may have high – or multiple – excesses (the amount you have to pay towards your loss yourself, before the insurer pays out).

“The lower the premium, the higher the excess” is the usual rule of thumb. Make sure you are clear about what you are covered for and what you can’t claim for.

Cheapest is not always best. The insurer may be keeping its premiums down because it has a poor record of meeting claims.

Alternatively, it may be deterring claims by making the process difficult to negotiate – such as by making you call a premium rate number, or making you transact by email only.

Are you prepared to risk this in exchange for a cheaper premium, or would you rather pay a few pounds more and have things go smoothly if you have a mishap that causes you to claim?

What you see may not be what you get.
Comparison sites try to make your application as easy as possible, so that you go on to buy and don’t get put off by lots of niggly questions at the start of your application.

That means that the site may not ask you for enough information to give you an accurate quote.

When you come to fill in a full application for your chosen insurer you may find the premium shoots up once you reveal details of your driving history or previous medical conditions, etc.

One site is not enough. You need to use more than one because they will feature different insurers and offer different promotional deals.

Comparison sites are just a guide to what’s on offer. Remember, too, that a few of the big insurers make a feature of not appearing on comparison sites, so you will need to phone them too if you want to see what they are quoting.

Read the policy documents. Finally, don’t rely on the blurb provided by the comparison site. Always read the small print provided by the insurer.

 

Read Annie Shaw's money articles every month in Saga Magazine.



The opinions expressed are those of the author and are not held by Saga unless specifically stated.

The material is for general information only and does not constitute investment, tax, legal, medical or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Always obtain independent, professional advice for your own particular situation.