Price comparison sites to be investigated over deals
- 23 November 2013
- From the section Business
Price comparison websites (PCWs) are to be investigated by the financial services regulator to see if customers are being misled.
The Financial Conduct Agency (FCA) said it was looking at whether certain deals were being promoted above others.
The watchdog will also investigate if a focus on price leads consumers towards deals which fail them when they come to claim from their insurance company.
The FCA said there was no suspicion of deals being misrepresented.
The review of 14 PCWs will question company heads about "whether the customer or profit is really at the heart of a business model", and survey site users to find out how they browse.
BBC business correspondent Joe Lynam said about 40% of all car insurance and a quarter of home insurance policies are bought online using price comparison websites which provide an easy to follow overview of the best prices on the market.
He said the watchdog, which took over from Financial Services Authority this year, was concerned too many customers were buying insurance based on price alone and were not checking they had the correct amount of cover they needed.
FCA spokesman David Cross said: "Price isn't necessarily the best marker of an insurance deal.
"It's all very well getting the cheapest insurance cover, but when you come to claim, if you find out that you can't, then obviously that money's been spent for nothing."
The financial watchdog said it would investigate if some PCWs were owned by insurers creating a conflict of interest.
It will also look at whether consumers are "misled into purchasing products or add-ons which do not meet their needs".
Mr Cross said: "When someone searches for something, are they necessarily getting the best deal for them, or are they just getting the deal the website wants to give them?"
A risk review in early 2013 highlighted the risk that firms relying on automated comparison algorithms to serve millions at low cost might not be able to properly scrutinise their own practices.
But the FCA stressed PCWs "perform a valuable service for millions of people" and said almost half of all internet users had used them to research motor insurance, with four in five going on to buy it through the same site.
The regulator has powers to force changes in adverts and promotions or to issue fines in the most serious cases.
Clive Adamson, the FCA's director of supervision, said: "We've all used a price comparison website, so we know how simple they make buying motor, travel or home insurance.
"We don't want to lose that convenience, but we do need to ask the question, 'does cheapest equal best?'
"We want to get to a place where consumers that use these sites buy with the confidence knowing that they have all the relevant facts."
One PCW, MoneySupermarket, said it was an independent company with no ties to insurance groups.
It said: "MoneySupermarket gives customers the information they need to save money on the products that suit them. If a policy doesn't offer breakdown insurance, for example, we'll show the extra cost of that.
"Customers have different needs; nearly half our customers do not buy the cheapest product on the market and prefer to select on features or brand."
The company said it received no commissions for its services, simply receiving a flat fee every time a customer buys a policy, and that these fees are "completely independent" of policy price.