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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Get Ready for Clearer Insurance Renewal Quotes!

Insurers are to be forced to provide clearer renewal quotes, which as I’m going to explain here on the Kiran Trivedi blog, is great for your personal finances.

They Won’t Tell You What You Used to Pay

We’ve all been there. A new premium for your home, your car, hell, even your dog, comes through and it’s gone up. You don’t know why. You think it’s gone up, but you’re not sure; the insurer won’t tell you what you’ve previously been charged.

It’s a common problem, and it can wreak havoc on your personal finances. If you can’t compare your old premium to the price of your new one, it’s far harder to craft an accurate budget that you can use to balance your personal finances in the long term.

Call for Easy Comparison Renewal Quotes

Well that could be set to change, as last week city regulator Association of British Insurers (ABI), itself wrote to the Financial Conduct Authority (FCA), proposing that insurers be required to remind customers what they previously paid when they inform them of a new premium.

However the ABI went on to suggest that the change should only apply to homes and motors, which represent a majority share of the market, and not, at last initially, to other types of insurance i.e. pets, foreign travel, commercial purposes etc.

Come Clean About Introductory Discounts

The ABI also suggest that insurers be forced to come clean about introductory discounts on premiums, which are often offered in the first year, to provide customers with an incentive to switch insurers.

The BBC reported that ABI’s deputy director general, Huw Evans, spoke out on the proposals, saying: "Insurers want to make renewing your insurance policy easier and clearer to understand by reminding you of last year's premium and flagging up introductory discounts." 

Many Customers Have Been Paying Over the Odds

The fact that even insurers are backing the proposals means that you can be sure that when they come into effect, which is expected to be the end of next year –they’ll act to benefit you, the customer.

This viewpoint was mirrored by Natasha Glasgow, head of insurance MoneySuperMarket, one of the consumer groups which lobbied for the changes. According to the BBC, Glasgow said: "At long last, the insurance industry is waking up to the fact that it has made the process of renewing policies at a competitive price as difficult as possible, with many customers paying way over the odds," 

I couldn’t have put it better myself. This move is great for your personal finances because it will ensure that you don’t draw money from the budget to overpay when you are presented with a new premium!

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