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FCA launches thematic review into price comparison sites

The FCA has launched a thematic review into price comparison sites selling general insurance products.

The review will involve 14 websites, representing 90 per cent of the market, and a number of insurance providers.

The regulator says the review will look at whether websites’ focus on price means consumers are failing to get the best deal for their needs. 

FCA director of supervision Clive Adamson says: “We’ve all used a price comparison website so we know how simple they make buying motor, travel or home insurance. We don’t want to lose that convenience, but we do need to ask the question, ‘does cheapest equal best?’

“We want to get to a place where consumers that use these sites buy with the confidence knowing that they have all the relevant facts.”

As part of its review the FCA will look at how key information is presented by price comparison sites and whether that might lead to consumers not fully understanding the service they are getting; whether there is too much of a focus on headline price; and whether consumers may be misled into purchasing products or add-ons which do not meet their needs. 

The regulator also plans to check for conflicts of interest, such as whether a recommended insurer owns a comparison site, look at the possible inappropriate use of customer data, and question firms about revenue generation to look at whether the customer or profit is really at the heart of a business model.

The FCA says it wants to ensure the growth in popularity of comparison sites has not come at the expense of transparency and fairness.

A key concern is the ‘expectation gap’ – where people believe they are getting a good deal because they are saving money initially, only to find they are not covered as comprehensively as they thought when they make a claim.

The FCA says the review will focus on motor, travel and home insurance because these are the most popular insurance products bought through comparison sites.

In addition to speaking with comparison sites and insurers, the regulator will also engage with trade bodies, other regulators and consumer groups. 

The FCA will publish its results, and what action it expects price comparison sites and insurers to take, next year.

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Comments

There are 4 comments at the moment, we would love to hear your opinion too.

  1. ….but we do need to ask the question, ‘does cheapest equal best?’. We all know it very rarely does but I wonder why they are only applying this rationale to GI business?

    It will be interesting to see wht their findings are and where it takes the comparison site industry.

  2. Absolutely agree with Marty. Sometimes clients will get exactly what they want, but it is going to be hit and miss, so buyers being guided by price alone must expect to miss out on benefits that would have been more appropriate for their circumstances. This is equally important for the life insurance market as it is for GI. The results must be awaited with interest.

  3. Without the financial sponsorship of product providers, many larger scale operations cannot exist and one thing is for sure; if the price for having such financial support is call oneself independent, then expect a lot of larger firms to go restricted in order to succeed.

    Nothing wrong with that and I am sure it won’t affect their consumer base, much as we may moralise to the contrary.

    I expect comparison sites to give me several options and to be less expensive than the cover which I already pay for (subject to like for like terms, which consumers MUST take their OWN time and effort to investigate!). I don’t expect them to offer whole of market (but they do need to state their intention) and don’t see that they necessarily need to, nor do I need to concern myself as to whether or not they are influenced in their decision-making. I just check a few sites and product providers and harvest a view: time and effort, but in life, lazy people often reap what they sow, it’s called shopping-around, much as the press and others proclaim people should do for their financial advice.

    Common 21st century economics, let’s get with the game (unless of course, we should just revert to having more face to face advisers/brokers checking things out for us, in which case this comes at a price…Which is it to be for goodness sake???).

  4. I sorry but shouldn’t this be a matter of course ?
    Why is it that every time the FCA think of some thing or realise there could be an issue they have a “thematic review” ?
    This sounds very expensive for some thing that they should already be doing, or am I missing the point here ? I smacks of the old FSA being reactive instead of the new strap line of the FCA being proactive ?
    We all have rules which we must abide by; comparison sites are no different

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