Why Are Insurance Comparison Sites Failing?

Following a report from the FCA, I ask on the Kiran Trivedi blog this week, why are insurance comparison sites failing, and what could it mean for you?

Kiran Trivedi Always Tells You to do Your Research!

The best way to protect your personal finances is to budget. To effectively budget, you need to root out the cheapest deals possible; which is why I’m always telling you to do your research!

One effective research tool at your disposal to help you lower the cost of insurance, is insurance comparison sites.  In theory, they help you compare and contrast insurance policies so you can find the most cost effective one for your circumstances.

FCA Finds Insurance Comparison Sites are failing.

In practise, however, it appears that insurance comparison sites are failing; at least according to the Financial Conduct Authority (FCA), who recently reviewed 14 price comparison sites.

Last week, the FCA went on record, suggesting that instead of helping consumers, as they are supposed to, they could actually be confusing them further. The regulator claimed that these sites were failing some standards, providing “unclear” information, and that therefore, customers were not being given the information they need to make an informed decision.

The BBC recently reported that Clive Adamson, the FCA’s director of supervision, spoke out on the report’s findings, saying that "our review found that they were not meeting our requirements in delivering fair and consistent outcomes for consumers."

A Conflict of Interest?

Furthermore, the FCA suggested that some insurance comparison sites failed to point out a conflict of interest to their customers. However, the regulator went on to reveal that there was no evidence to suggest these companies had made a profit from this potential conflict of interest.

It’s important to note that some sites do flag up this conflict; however they often make it as hard to possible to find. Gocompare, for example, are 50% owned by insurance company Esure. The site does point this out, but only in the small print.

What Does This Mean for Your Personal Finances?

So what does this mean for your personal finances? Essentially, it could mean that you are not getting the most value for money from these insurance comparison sites, as you are making decisions on who you find to be the most cost effective insurer, based on potentially misleading information.

This is why I’m always telling you to do your research here on the Kiran Trivedi blog, if you want to protect your personal finances. Only once you’ve rooted out all the necessary information, can you make an informed decision on how best to save money on your household budget. 

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Is Your Overdraft Good Value for Money?

Whether we like it or not, Kiran Trivedi readers, we all occasionally need to dip into our overdrafts to balance the books. But is your overdraft good value for money? Well according to the Financial Conduct Authority (FCA), it isn’t.

The thing about overdrafts is that no one wants to dip into them; it leaves you owing money and unless you have a student or post graduate overdraft, you’re most likely going to have to pay a charge for that service. However sometimes you have to, just to make it through the month. But is your overdraft leaving you worse off?

Overdrafts “Complex and Opaque”

The FCA has come out this month and put the whole lender overdraft culture into the spotlight, by suggesting that it is “complex and opaque.” What they mean by this, is that they are hard to understand, which means that because customers don’t necessarily understand the rules, they are vulnerable to losing money.

They’ve estimated that customers have lost in excess of £8 billion to banks and building societies through complex overdraft rules, and now the financial body has decided to launch a deeper investigation into the issue over the summer. Watch this space to see how it plays out.

The FCA has been reported to have said on the issue by news sources that: “Even the most astute consumer could struggle to understand what they are paying for" when it comes to an unarranged overdraft. So what should you do to tackle this problem?

Kiran Trivedi’s Guide to Handling Overdraft Issues

As long as you stay informed and you keep on top of things, there’s actually quite a few things to control the situation with your overdraft. These are:

• Research: Before you agree to anything, do your research. It’s a very competitive market out there at the moment, especially with the economic recovery,  and if you look around, you’re sure to find the right overdraft option for your personal finances
  
• Read the Fine Print: Lenders don’t exactly like to advertise the more unpleasant parts of their overdraft facilities, so they’ll usually stick it all in the fine print. Make sure you read carefully before you sign.
  
• Budget: An overdraft really should be a last resort; you shouldn’t be dipping into it to fund things like shopping sprees. Carefully budget so that you only need to use it in cases of emergency.
  
• Get Help: If you think you’ve been hit with unfair overdraft charges, and the bank are ignoring you, contact the FCA. Now is literally the perfect time, as they’re actually investigating the matter. 

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