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Price comparison websites accused
The FCA found consumers were not being given the right information to help them make decisions when using price comparison sites
Price comparison sites covering car and household insurance are failing to give consumers a true picture of the products they buy, the City regulator said today.
The Financial Conduct Authority (FCA) accused some sites of focusing on the price of a policy without clearly explaining "crucial features" such as levels of cover and the excess a customer might have to pay in the event of a claim.
It has asked the industry to take action on the specific areas identified in the review and urged consumers to consider that not all products are the same and the cheapest product may not always be the best for their needs.
The FCA reviewed 14 websites between December and April, but did not identify which they were. It said an estimated one third of consumers buy their motor insurance policy through such sites.
By failing to provide clear information, the FCA said 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.
A few websites did provide detailed information about the policies they reviewed, but the level of clarity in the market "varied significantly".
The regulator added that some sites were part of a larger insurance group or broker but did not disclose potential conflicts of interest, which is against its rules.
The watchdog concluded that consumers were not being given the right information to help them make decisions.
FCA director of supervision Clive Adamson said: "Price comparison websites have increased in popularity among consumers, with an estimated one third of consumers buying their motor insurance policy through them.
"However, our review found that they were not meeting our requirements in delivering fair and consistent outcomes for consumers. We also found, through our consumer research, that consumers had a number of misconceptions about the services they provided.
"We expect price comparison websites to take on board the findings of the review. It is also important for consumers to understand that not all products are the same and the cheapest product may not always be the best for their needs."
The watchdog also said it was not always clear to the consumer that most price comparison groups are paid fees by insurers for products sold through their websites.
The FCA survey builds on a 2011 report by the watchdog's predecessor, the Financial Services Authority, where it first warned these websites about misleading product information and their relationships with insurers.
The British Insurance Brokers' Association's chief executive, Steve White, said: "We are pleased that the FCA has reviewed this important area and we are not surprised by the findings. We now want to see the FCA drive home the recommendations that it made in 2011 and ensure that these are complied with."
Gocompare founder and chief executive Hayley Parsons said: "Gocompare.com fully supports measures to promote best practice in the price comparison website industry. Although we regularly update our services to reflect our customers' evolving needs, we will be reviewing the findings of the FCA's report."
"Gocompare.com has always strived to show its customers the full story when it comes to insurance comparison, and was the first comparison site to enable its customers to compare the levels of cover, as well as price."
Rival Moneysupermarket said it was spending £14 million this year on new technology to make it easier for customers to compare policies on features other than price.
Moneysupermarket chief executive Peter Plumb said: "It is fundamental that any policy purchased through us is appropriate for an individual's personal circumstances and we have found that nearly half of our customers do not buy a policy based on price alone - despite that being the main driver to use price comparison sites - instead basing their decision on other features such as additional cover, excess amount or brand."