Regulator to investigate price comparison websites
City regulator the Financial Conduct Authority (FCA) is to investigate insurance price comparison websites to check whether they offer consumers the fairest deal.
Price comparison websites have exploded in popularity in recent years, with almost half of all internet users having used one to research motor insurance, and four out of five going on to buy insurance via such a site.
But the FCA said it wants to ensure that their rapid growth in popularity "has not come at the expense of transparency and fairness."
Of major concern is something the FCA identifies as "the expectation gap", when consumers think they are getting a good deal only to find out later on that they are not as comprehensively covered as they thought.
Does cheapest equal best?
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."
While the FCA has acknowledged that most price comparison websites perform a valuable service for millions of consumers, it wants to review how they work in detail to gain a better understanding of exactly what people want from them, when they are shopping for insurance, how they use them, and how they might be improved.
It will look at how information is presented, and whether that might lead to consumers failing to understand the service they are getting, and investigate whether there is too much of a focus on headline price, and whether consumers may be misled into purchasing products or add-ons which do not meet their needs.
It will also look at whether price comparison websites put the customer at the heart of their business models or if profit is key.
The review is focusing on motor, travel and home insurance because the FCA says they are the most popular insurance products searched for on price comparison websites.
It will publish its findings next year.