Getting the best deal with insurance comparison sites

The boom in insurance comparison websites, which have revolutionised the way consumers shop for cover, has finally come under the spotlight. Sarah Routledge compares the comparison sites.

In a recent review of 17 websites, the Financial Services Authority found "mixed evidence in terms of the clarity, fairness and accuracy of the information given to customers" and warned consumers to check the cover they are receiving is right for them, and not just at the best price.

The regulator said it will follow up its report with visits to the companies involved and test whether the information they provide to consumers is appropriate.

Price is certainly uppermost in people's minds when looking for insurance. A Datamonitor found price was the number one criteria for people looking for insurance in 2007. After being bombarded with advice from the media and consumer groups to shop around for financial products, clearly the message is getting through.

Internet-savvy customers combined with a highly competitive market means that insurance – and motor insurance in particular – prices are kept low. And although it may seem like insurance costs are high, in reality premiums on motor insurance are so low that the industry has not made a profit in 14 years.

The sites save time, too. Entering one set of details simply and quickly by answering a few questions, rather than spending time repeating the same answers over and over to several insurers is certainly tempting.

Despite the obvious benefits of competition and ease of use for consumers, there are concerns that the industry has grown faster than the regulatory framework needed to support it.

The British Insurance Broker's Association (BIBA) is calling on the FSA to strengthen rules governing these sites. The group wants clearer information and quotes to be guaranteed – as they are when you go to a broker.

Graeme Trudgill from BIBA says: "We did a lot of research and found that a third of people did not realise that assumptions are being made on their behalf. For example, when calculating a quote, a comparison website might assume you have a standard job, but if you have a higher-risk job it will be more expensive.

"We prefer websites that do not make assumptions – like Gocompare.com."

BIBA has recently welcomed Gocompare.com as a member because the site "compares products on their suitability to individuals' requirements as well as price", the group said in a statement.

A spokesperson from Tescocompare.com, one of the newer price comparison sites, backed up this view.

"Not every site gives details, but Tescocompare.com gives details of all the policy terms and conditions," their spokesperson says.

He added it is important to compare not just the price when you are using comparison sites to buy insurance, but also the benefits that insurers offer.

The Tescocompare spokesperson warns: "There is always a reason your insurance is so cheap!"

Financial research firm Defaqto also backed the FSA's findings in its recent report into the motor aggregator insurance market.

The report highlighted several issues in the market. On some sites, question boxes are already filled in, which could lead to the wrong information being given to the insurer and ultimately the policy being invalidated.

In addition, in order to get the cheapest quote, the voluntary excess field is often set at its highest limit. But the consumer may not be happy when they realise their claim will cost them £500.

And although some sites provide a comparison tool to show what benefits each insurer offers, others still only offer a price comparison, leaving the consumer in the dark as to what they are actually getting for their money.

The quote you receive is not always guaranteed, either – some sites offer a 'estimated premium' so that once you click through to buy the policy, the price changes.

Report author Mike Powell says there are several key things to be aware of when using comparison sites.

"Some of the sites have auto-complete sections that are answered in the positive, where they can easily be missed, and consumers may not read every single question.

"If there is a question, for example, have you ever had a drink-drive conviction, the box is automatically ticked 'no'. If you then make a claim in the future and you haven't told your insurer about a conviction, your policy could be invalidated."

"The main thing is when you get the quote back, you should check the information is correct, because there have been instances where it has not been," Mr Powell adds.

Insurers have different criteria for their policies, and some may want quite specific information – like how many miles you drive a year, or for how long you have been driving – that will make a real difference to your premium.

But comparison websites may not include this information accurately, so your quote might be being calculated with the wrong information.

And although it may seem like using one site and answering one set of questions will be enough to get you the best deal, research from Defaqto proves this is not necessarily the case.

"We did an experiment, where we looked at six quotes on several different sites, and found the same insurers where giving different quotes, so you may need to go to three or four different aggregator sites to get the best quote, as they all ask different questions."

Mr Powell suggests the price comparison industry could improve these issues.

"One of the things they could do is ask the same, uniform questions," he says.

The FSA should look into stopping sites from filling in questions and setting default excess, so they are a true comparison tool, Mr Powell believes.

Clearly comparison websites do offer a great time-and-money saving way of shopping for insurance – but as the research shows, it does not mean that the buyer can sit back and let the site do all the work.

Thinking carefully about what kind of cover you need, and what benefits you would like included are very important when selecting your policy, no matter how you go about it.

Sarah Routledge