Comparison sites peaked just a few years ago, with a number of high profile ones all hitting the web at around the same time. They each offered the same sorts of services, comparing insurance and other financial products from any number of companies in an automated tool that made the experience of shopping around far easier for the consumer. To try and beat one another to the next customer in-line, they waged war with TV ads, different mascots, online banners and a variety of increasingly elaborate methods.
However what ultimately ended up securing some business for a few of the companies, was making exclusive deals with insurers. Some companies like Direct Line refused, instead only offering their services to those that went to its website directly. However, of those that remained, some applied specific discounts to insurance premiums and other products if they were referred by a particular comparison site. Now though the Competition and Markets Authority (CMA) has released a report on the practice and is recommending to the government that it makes it illegal.
“There need to be improvements to the way price comparison websites operate,” said Alasdair Smith, chairman of the private motor insurance investigation group (via The Guardian). “They certainly help motorists look for the best deal, and this in turn has led insurers to compete more intensely, but we want to see an end to clauses which restrict an insurer’s ability to price its products differently on different online channels. We expect this to lead to greater competition between price comparison websites.”
Ultimately he explained, the current situation was leading to higher car insurance prices, because if the best and lowest cost was only associated with one website, it meant prices elsewhere didn’t need to be quite as competitive. This isn’t a good situation for the consumer, so his report urges the government to fix that.
Another aspect that was highlighted by the group in an interim report earlier this year, was the hiring of courtesy cars in the event of an accident, with some insures using what seems like deliberately obtuse methods of acquiring them, which can lead to higher costs for hiring and therefore a higher premium for the consumer. However, oddly the group has now rescinded its original complaints and has said that issue is simply too complicated to fix. It even concluded in the report that it could not “see an effective way of addressing this problem fully, short of a fundamental change in the law.”
This has led to the Association of British insurers complaining about the report, ssuggesting that its deliberate recommendation for inaction could even lead to higher courtesy car costs in future, as those who deliberately inflate them to make more off of the consumer will now see their future secured.
As a stop gap solution, the CMA has promised to make more information available to consumers so they can make a more informed choice. It also pledged to make sure that consumers properly understood the no-claims-discount protection product, which is often missold since consumers believe it will mean their premium is unaffected in the case of an accident. In actuality, premiums almost always go up in an instance like that, even if the no claims bonus itself is retained.