The aggravation of aggregators

The price comparison website market has become an overcrowded pond in recent years. So much so that when Britain’s biggest retailer pitched in last summer with its Tesco Compare motor insurance site, the launch created more of a ripple than a splash. As some are joking, there’s now a gap in the market for a comparison site to the comparison sites.

I’ve already expressed my scepticism on the worth of most of these aggregators, which generally assume price is the consumer’s single overriding concern. With households increasingly strapped for cash this year as the cost of basics rocket that’s hardly surprising, and advertising from some of the biggest players shamelessly plays on this ‘cheapest is best’ premise.

But as organisations such as the British Insurance Brokers’ Association point out, many users of price comparison sites don’t spot significant differences between the various policies on offer. A so-called cheap deal is no bargain if the cover provided carries significant exclusions or if claims are subject to a hefty self-insured excess.

“A so-called cheap deal is no bargain if the cover provided carries significant exclusions or if claims are subject to a hefty self-insured excess.

David Quick

A number of consumer champions have latched on to these shortcomings and are sounding the alarm on other areas where price comparison sites are flawed. The most recent alerts have come from independent researcher Defaqto and Which? Money magazine. A survey by Defaqto – focusing on home insurance rather than the more saturated car insurance market – assessed the offerings of 28 different aggregators.

While the news won’t surprise anyone who knows of Direct Line’s refusal to cooperate with any aggregator, Defaqto confirmed that no site provides customers with coverage of the whole market contrary to their advertising claims. And out of the 28, it deemed only five sites could justifiably claim to be true aggregators, with the remainder generally relying on quotes from intermediary panels that customers could easily obtain from their local broker.

The Which? Money survey found hefty variations in the best car insurance quotes from the three biggest sites, even when exactly the same underwriting information was entered into each site. Even more telling was the discovery that, in many cases, consumers could get a better deal by going direct to the insurer than by using an aggregator website.

“Will the Financial Services Authority, which has attempted to show so many other sectors that it has teeth, do more to regulate the assessors?

David Quick

Both surveys also concluded that few sites offer consumers enough detail on how each policy compared for them to make an informed choice, and that aggregators often made a number of underwriting assumptions in order to obtain a quotation.

Will the Financial Services Authority, which has attempted to show so many other sectors that it has teeth, do more to regulate the assessors? Its preliminary investigation earlier this year turned out to be something of a damp squib, so it will be interesting to see whether it has toughened up its approach when it reports again in October.

Some updated guidelines are needed, given that the FSA’s regulation of comparison sites dates back to a time when there were relatively few players. If it’s true that the full effects of the credit crunch have yet to kick in, many more consumers will resort to the aggregators to save a few pounds. With so many shortcomings exposed, they deserve a code of practice. It’s the promise of protection that is being purchased, not a tin of beans, and price is far from the only consideration.

David Quick is managing director of insurance network, CETA.