Make no bones about it, price-comparison websites are a good thing. They expand choice and provide valuable information for consumers. What's more, they are a hothouse of competition, with the cheaper providers standing out for all to see.
Before their advent, buying car and home insurance involved phoning many different brokers and providers, repeating the same information ad nauseam. To be frank, I'd usually go no further than the first reasonable quote.
Granted, the comparison sites are ostensibly just online brokers but the information is displayed so clearly that somehow it feels more transparent than the traditional client/ insurance broking arrangement, where you phone someone up and they go away and get you a quote. You then have to trust that there is nothing untoward and that they are acting in your best interest rather than pushing you towards the product that pays them the most.
However, not all is hunky-dory with the price comparison sites. At The Independent on Sunday we have raised concerns about this industry before. Now, after a four-month investigation, the Financial Services Authority (FSA) has echoed our views. In short, the FSA has examined 17 different sites and is worried about the clarity, fairness and accuracy of the information on offer.
Chiefly, the problem is that the price the user is first quoted can change considerably once they are passed through to the insurer. There seem to be several reasons for this. First, once the user clicks through to the insurer's website to take the quote further, they are suddenly hit with extra charges for things such as legal cover or uninsured loss recovery, or for paying monthly rather than annually as a lump sum.
Second, some of the sites ask only basic questions of the user, which means the initial quote they present is based on incomplete information. Now when the user clicks through they are barraged with further questions, often making the final quote more expensive. No wonder some users ultimately feel misled and a little cheated.
This second point brings us to how the sites make their money. Some are paid according to clicks, regardless of whether the customer proceeds and buys the insurance. It must be pretty tempting for these sites to present the user with the best-case scenario to get them to make that money-spinning click.
Having said all this, personally, I think things are improving. When I last used a comparison site, to buy car insurance, I saw no alteration in the quote, even after I stated my profession. (Journalists tend to be ranked alongside stunt drivers in the car insurance risk stakes, because it's presumed they will be speeding around after celebs and are always drunk, which I can assure you is true only 90 per cent of the time.)
However, the FSA is right to point out its concerns and sensibly it will visit each of the 17 sites in turn to ensure they are playing fair by customers. I have often been critical of the FSA's "light touch" regulation but on this occasion it's the right approach, at least for now. The price comparison sites, even in their present form, palpably work to the benefit of most consumers – if you need evidence of that, you should see how some insurance bosses foam at the mouth at the mention of them. They have encouraged switching, which is generally good. Now, with some constructive criticism from the FSA, they can be come more useful still.