SPECIAL FEATURE: Simples… Not
Their advertising is so ubiquitous and pervasive that you could be forgiven for thinking that price comparison sites were now the route of choice for anyone looking for any insurance, but the figures do not bear this out.
In last year’s Mintel report on household insurance direct business accounted for only 18% of household sales whereas intermediaries’ share of this market has increase from 33% to 41% over the last five years.
Motor insurance lends itself readily to the commoditised stripped out online world of the aggregators but household insurance is, I believe, a more complicated product and one where it seems more and more customers are seeking advice.
However, there are dark arts at play with the price comparison sites that consumers are not aware of and it is our duty to educate them, especially in light of the increasingly competitive space we all occupy.
There is already a growing disillusionment among those of the public who have seen through some of the more spurious practices of these firms.
Here are a few insights you can offer to help your clients see the light too.
The independent research organisation Resolution Foundation recently published a report that found that 30% of prices quoted on many of the price comparison sites were wrong, which is at best sloppy but at worst misleading.
Insurers use a range of ever more sophisticated mechanisms in order to manipulate their positioning on these platforms.
Some design specific products for these sites designed to simply grab the headline rates – these are known as “skinny” products. But in reality they are simple stripped down commodity products that lure the consumer in with the promise of a cheap rate only to later load the premium with a range of options that better quality products include as standard.
Now there is nothing wrong with that if you are transparent about it, unfortunately most are not and rely on the inertia of the consumer to simply accept the practice.
The Smoke and Mirrors
Another mechanism by which the platforms hook you in on price is the practice of using default answers to drive down headline prices.
For example, on household insurance, defaulting a standard answer to ‘occupied during the day’ will reduce the premium, but in most cases will not be true, and left unchecked could invalidate any claim.
Caveat emptor – careful checking is required and as these platforms take no responsibility for the sale the onus is squarely on the shoulders of the consumer.
Likewise many will default the excess to £250 when in reality many insurers will set the standard excess at £50 – £100.
Obviously a higher excess will drive down the premium, but with a sting in the tail when it comes to claiming.
Just quoting can damage your wealth!
Most price comparison sites will automatically carry out a credit search when your client searches for household quotes, the permission for which is buried in the small print, and as such I am absolutely sure that many consumers have no idea this will be done simply as a consequence of getting a quote.
This practice only came to light for us when one of our brokers found that his clients credit score had slipped over a four day period resulting in a reduced mortgage offer.
The broker was so confused he investigated and eventually traced the reason back to the client’s credit file. Following a weekend of researching household quotes, the client now had more than a dozen imprints on their file, which in turn impacted their credit rating and thus affected their credit score.
There are a couple of reasons given by the comparison sites for doing this. Firstly some insurers are increasingly using lifestyle data in order to help them build a risk profile of the client, but this is by no means the norm but would preclude these insurers from being able to quote if it were not collected and as we know these sites want the broadest possible range of companies to quote.
Secondly, more than 85% of customers choose to pay their premiums monthly and therefore will enter into a credit agreement in order to do this and as such their credit record is scored accordingly.
What can you do?
For a start, don’t assume it’s inevitable that your clients will arrange their insurance through a comparison site. The statistics clearly show that’s not the case.
Do your clients a favour and tell them about the smoke and mirrors used by the aggregators and some will even appreciate the advice enough to buy from you instead.