THEY’RE one of the biggest financial innovation stories of the past decade, giving millions of us more choice and access to cheaper products.
There’s a good chance that you’ve used a price comparison service and found it useful, whether you were shopping around for home insurance, looking for a decent savings deal or trying to cut your energy bills.
It’s no wonder they’re popular, despite being responsible for some of the most annoying adverts on TV.
But their growth has come with some disturbing side-effects. There’s often very little transparency in the way they work and they’ve re-shaped the insurance market in a way that is detrimental to consumers, despite the low headline prices.
By focusing almost exclusively on price they’ve created a market in which people are buying cheap policies that have been “hollowed out” – reducing the benefits and often rendering them useless.
Comparison websites may have started out by shaking up a stale model that wasn’t serving the best interests of customers, but they have long been due a regulatory overhaul.
The good news is that the Financial Conduct Authority (FCA) appears to recognise this. In a review published last week it found that many comparison sites had failed to meet consumers’ expectations.
They frequently fail to give people the information they need to make suitable choices and often they are simply misleading. Some had fallen a long way short of complying with the FCA’s rules.
All very damning stuff that would seem worthy of a crackdown or two, you might think. Not so.
The bad news is that the regulator has again stopped short of acting on its findings.
Rather than tackle the issues it uncovered and pull the miscreants into line, it has merely given the relevant websites a rap on the knuckles and a chance to address the shortcomings it highlighted.
So much for protecting consumers – instead it’s virtually business as usual. And that means facilitating mis-buying on a scale that will leave huge numbers of people with worthless policies that don’t meet their needs.
More than eight million people buy motor insurance alone through price comparison sites, the FCA research found. How many of those people were aware as they searched for deals that some sites exclude insurers that don’t pay the kickbacks they want? Aviva and Direct Line – two of the UK’s biggest insurers – chose a long time ago not to be listed on comparison sites.
But there’s no easy way to find out which providers are excluded by a comparison site and which aren’t, or why (although the answer to the final question usually boils down to commercial relationships).
There are other serious misgivings about comparison sites, ranging from conflicts of interest and inconsistent terminology to flawed application processes and the way they handle non-standard insurance cases.
In many ways comparison sites are a force for good, but it’s not a level playing field and consumers aren’t getting the protection they need. Given that the regulator recognises this, its weak intervention is as baffling as it is damaging.