Jeff Salway: Comparison sites a boon for consumers but beware the pitfalls

Published on Friday 20 November 2009 18:36

THE emergence of product comparison websites has been one of the big pro-consumer developments of the past decade.

Websites such as moneysupermarket, Comparethemarket and uSwitch have helped put more power into the hands of consumers by making it easier to search for competitive products and to switch from those that fail to deliver. For products and services such as energy supply, home, travel and motor insurance, savings accounts and current accounts, comparison sites offer real value if they are used properly and people understand how they work.

Therein lies the problem, however. A survey by consumer group Which?, published this week, produced customer satisfaction scores for comparison websites lower than for any other area of financial services that it has surveyed. Not one site achieved an average satisfaction score of more than 50 per cent, with users lacking confidence in the ability of comparison services to find the best deal. What is particularly instructive is that two-thirds of site users expected to be given results that gave the websites the best commission.

This lack of trust arises from inconsistency in the results provided by the different sites and a lack of clarity as to how they work. The companies and products that are excluded, relationships with providers and how the sites make their money all need to be made far clearer to users. None of the comparison sites has total market coverage and many don't carry products from some of the biggest providers.

Their independence is a moot point too, as most sites make their money from advertising kickbacks, where they are paid a commission each time a customer clicks through from the site to a product provider. Companies who do not have commercial deals with the sites tend to be omitted from best-buy tables, while those that do cough up have their products highlighted above more competitive alternatives, to the confusion of the user.

Some of the terminology is misleading too. For instance, type "income protection" into a search engine and the first result is Moneysupermarket.com. But this takes you only to payment protection insurance products offering far inferior coverage to that provided by genuine income protection insurance. It's also worth noting that, with the best-buy tables dictated by price, many people are buying cheap products that are nevertheless unsuitable for their needs.

Steps are being taken to improve the governance of comparison sites, but these are in their infancy. In the meantime, the onus is on consumers to continue taking advantage of comparison sites, albeit with a degree of cynicism and while taking the time to use more than one.

THERE are so many problems with pension provision in the UK that merely changing the term itself seems a trivial response. But the word "pension" undoubtedly has mixed connotations, particularly when it comes to encouraging younger generations to save. Axa believes around a fifth of those aged between 18 and 24 are put off starting a pension for at least five years because they are deterred by the term and its association with all things "old age".

So Axa is launching a competition on Monday to find an alternative word or phrase for pensions. I suggest something simple along the lines of the lifetime account or fund, provided it offered some form of access to the money prior to retirement.

Suggestions can be made at www.axa.co.uk/mybudgetday and the winner gets one year's single person full state pension of 4,953.