This report summarises the findings of our thematic review focused on the intermediation of general insurance products (private motor, home and travel) by price comparison websites. These have rapidly increased in popularity among consumers and are a key distribution channel for retail general insurance products, especially for private motor insurance. We estimate that one third of the 26.6m motor policies written in 2013 were sold through these sites.
Who should read this paper?
This report is aimed at price comparison websites (PCWs), insurers, brokers, relevant trade associations and consumer bodies. It should also be of interest to other regulators.
What was the scope of the review?
We assessed whether PCWs were complying with their regulatory requirements and were providing appropriate information to ensure that consumers can make informed decisions when buying their general insurance policy. This included us assessing whether information was being presented in a way that allowed consumers to compare key product features, total costs and main exclusions and understand the role of the PCW and the service they provide.
What did we find?
We found that PCWs :
- did not always ensure that consumers were given the appropriate information to help them make informed decisions. This is particularly important as FCA is concerned that consumers’ focus on headline price and brand when using PCWs could distract from crucial product features such as policy coverage and terms. By failing to provide clear information, the websites are increasing the risk that consumers may buy products without understanding key features such as level of cover or excess levels and purely focus on the price. While a few websites did provide this information clearly the level of clarity varied significantly depending on the provider.
- did not make clear their role in the distribution of the product or the nature of service they provided. For example, some consumers mistakenly believe that the price comparison website had provided them with quotes on the best policy for their individual needs and had assessed the suitability of the policy for them.
- that where a PCW were part of a larger group of an insurer or broker, disclose this potential conflict of interest, which is against FCA rules. However, the FCA found no evidence that these firms used this relationship to their commercial advantage.
- had taken steps to comply with their regulatory obligations, they had failed to fully implement Guidance published in 2011.
What are the next steps?
We gave the PCWs involved in the review individual feedback and asked them to take action on specific areas where they were falling short of our expectations. In some cases, they are already making positive changes.
We also expect all firms (PCWs and providers) to consider the findings detailed in this report and to take appropriate action, where applicable. The findings may also be relevant for PCWs operating in other financial sectors. We have set out our expectations and the actions for firms in section 4 of the report.
We intend to follow up with the PCWs in the review to ensure that they have addressed the specific issues identified and, where appropriate, we will use the full range of regulatory tools available to us.
How can I find out more?
We recently published consultation guidance on Annuity comparison websites.
Alongside our findings, PCWs should also consider EIOPA’s January 2014 report on good guidance practices on comparison websites.
The Competition and Markets Authority is investigating the private motor insurance market.