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When the quote comes in

Insurance comparison websites have been a hugely innovative addition to the market in recent years but regulation has failed to keep pace with technology and consumers could sufferas a result.

The British Insurance Brokers’ Association recently called on the FSAto review the regulationof comparison sites. When the regulator created the rules for the sale of general insurance products in2002-03, comparison sites were still in their infancy and were not ontthe regulatory radar.

The growth of comparison sites has been so rapid that many in the industry are concerned that the rules do not represent the electronic world we live in now and are leaving consumers exposed.

Independent research into comparison sites has identified some concerns. These include:

  • More than half of insurance buyers do not fully understand the differences between each type of insurance policy offered through comparison sites.

  • Only 6 per cent believe that the details of what a policy does and does not cover are explained fully.

  • 84 per cent say the details of insurance policies offered through compar-ison sites can be confusing.

  • 93 per cent expect comp-arison sites to be regulated in the same way as insurance intermediaries.

    These findings are supported by earlier research from Defaqto and YouGov which also raised concerns over comparison sites.

    The research found that some comparison sites use assumptions as the basis of their quotations, which could lead to consumers buying a policy which isnot appropriate for them.

    For example, when buying home insurance, some sites assume that “the property is not used for any business-related work at all, which includes the contents”. This restriction seems unduly harsh, given the number of people who work from home these days, even if it is justto log on to the officeemail system.

    Some motor insurance quotes assume that the person buying the cover is the main user of the car but it could be their spouse or partner.

    These assumptions mean that consumers could be directed to the wrong provider and buy an unsuitable policy or that the original premium quoted is massively underestimated.

    The really worrying thing about assumptions is that a third of buyers are unaware that some comparison sites evenmake them.

    The important point is for customers to have a suitable insurance policy with appropriate cover. Biba wants change. We need to see minimum standards across the industry where a consumer can go to any regulated seller – broker, insurer or comparison site – and get the same consistent information to help them make an informed decision.

    Comparison sites should play by the same rulesas everyone else in the insurance industry.

    Biba fears that too many people are logging on and making a decision based solely on the price ofa policy rather than the protection it offers.

    Biba welcomes the constructive comments received from many comparison sites in response to its concerns and we will work with them to find a solution to this problem.

    An insurance broker must ensure their customers buy suitable policies at a good price but the message from some comparison sites focuses on buying the cheapest cover, which may be woefully inadequateand often with an astronomical excess.

    We have spoken to brokers, insurers and customers who use the sites. Some in the industry say it is great that they are able effectively to outsource their marketing to a comparison site which will spend millions of pounds on advertising. In fact, if the rumours are true, one ofthe comparison sites is the biggest spender on Google advertising in the UK.

    Biba is encouraging more of its members to engage with comparison sites and internet solutions. We just want to ensure that the consumer ends up with a suitable policy.

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