Comparison sites are a godsend for consumers trying to find a competitive product in a crowded market, but there are caveats, explains Nathalie Bonney.

Would you change the way you shop for a financial product if it could save you £500? This is the claim some comparison websites use to urge more people down this route. And it seems to have worked its magic.

In a recent poll on our website, 52% of respondents said they always use comparison sites when taking out a new product, and a further 37% said they sometimes use them.
 
Comparison websites are a relatively new phenomenon: just 10 years ago, if you wanted to compare insurance policies or savings accounts you would have had to go to the individual providers.

But now, simply filling out some simple details online brings up a whole list of different products for you to choose from.

We examined the top five players – moneysupermarket.com, confused.com, gocompare.com, comparethemarket.com and uSwitch.com – to see if there are any differences between the services they offer, and what you need to look out for when using them.

Using comparison sites to help you find the most competitive deal is, in itself, not a bad idea. "They are a good, quick way of finding information on products and used wisely they have their place.

"But you should be cautious about relying solely on them," warns Rebecca Fearnley, principal researcher at Which? Money. "No comparison site searches the whole market, with some providers' products only available direct from their own sites."
 
For example, two of the UK's largest insurers, Aviva and Direct Line, are not listed on comparison sites, so it's important to also check individual providers' websites before you make a decision.

Advertising campaigns by comparison websites tend to stress the potential savings customers can get by using them. For example, a recent uSwitch.com advert claims users can save up to £529 on household and communication bills.

However, it's worth taking these figures with a pinch of salt. High excesses (where you have to pay part of any claim yourself), and default answers that will result in the cheapest quotes, will have been used to calculate these impressive figures.

"Be aware of the quotes: sites usually defer to quite high levels, and sometimes it's not very clear what is a voluntary and what is a compulsory excess," says Fearnley.

In May 2008, the Financial Services Authority (FSA) investigated comparison sites. Although it found no issues with them, it did stipulate that all of the providers should highlight any assumptions they have made during the quote process.

This is less of an issue with regular banking products, but a big consideration with insurance products.

It's true the websites don't actively hide the optional excess amounts but the main five websites, bar uSwitch.com, all automatically presume an excess of £250 on all car insurance applications.

Defaqto's recent Web Aggregators Insight Report explains the potential pitfalls: "Although most sites allow the user to change the voluntary excess to a level that's more acceptable before quotations are provided, this is an easily missed question.

"It's certain there are some customers who either don't read the question or simply don't understand it," says Mike Powell, the report's author.

A further implication is that the consumer is removed from part of the application process and doesn't stop to consider what excess they would be happy to pay.

As well as being aware of the voluntary excess, look out for the compulsory excesses, which will add to the overall amount you have to pay in the event of a claim.

Gocompare.com, for example, displays voluntary, compulsory and total excess separately in its 'proposer excess' column, whereas comparethemarket.com displays only the total excess.

"If the customer chooses an insurance provider whose compulsory excesses are not clearly stated, they could find themselves paying out £600 or more when they need to claim," Powell warns.

The report also draws attention to default answers, which are practiced by over three-quarters of the market and seem to have risen in popularity in the last couple of years.

In 2007 65% of risk questions were pre–filled, but by 2009 this had risen to 79%. These questions assess how risky you are and therefore how likely you are to make a claim.

Aside from making policies cheaper, default answers that don't match your circumstances could make your insurance policy invalid. For example, moneysupermarket.com defaults your home insurance criteria as "occupied in the day".

Fearnley points out that "for most people, that answer would be invalid and make the cover void, as it would have been bought on false information". She cites comparethemarket.com and uSwitch.com as the two sites with fewest default answers, but all websites are guilty of this.

The more questions you have to answer and the more detail you give, the more accurate your quote is likely to be. As an example, uSwitch.com was the only website to ask users if they are a member of a driving organisation, and this resulted in the aggregator finding the cheapest quote.

Second cheapest in Moneywise's car insurance test quotes is confused.com. It asks applicants to supply the date since you have held your licence, whereas gocompare.com only gives you the chance to select how many years you have held a licence for up to 12 years.

Filling in the most up-to-date and detailed information will also ensure that you get a suitable level of cover, rather than simply focusing on the price.

Unfortunately, the chances are that, in the hope of a quick quote, you probably fill in the information in a hurry and not necessarily correctly. In 2008, 86% of risk information entered on comparison sites didn't match up with the providers' site, according to Defaqto.

A year on and there have been improvements, but 68% of risk information still doesn't match up.

Powell points out that because websites ask different questions, often the provider will still need to ask further questions to cover all the details, cancelling out the supposed benefit of only having to fill out your details once.

"It's not always the aggregator's fault; they have to get the information from the providers, which don't always send it all," he says.

However, you can save quotes, and then retrieve them and update where necessary. This should prevent you from passing on incorrect details to the provider and having to supply all the information again, but it does mean you still need to check that everything is correct.

All of the comparison websites that Moneywise looked at required consumers to supply an email, or in some cases register further contact details, before they could proceed with an insurance quote.

Both confused.com and gocompare.com didn't even offer users the chance to opt out of third-party contact until after the initial search process, the former requiring you to send an email afterwards and the latter needing you to click on its privacy statement and unsubscribe.

"I think the comparison websites make it harder than it should be to opt out of third-party emails. I'm still getting emails generated by the research I did for Which? back in September," says Fearnley. "Unless you're actively looking for them, privacy settings are quite hard to find."

Comparing savings accounts and credit cards is relatively straightforward compared with insurance products.

However, because the comparison websites don't bother to filter results, the products might not suit your needs – or, in the case of credit cards, you might be ineligible for the best rates.

Moneysupermarket.com and confused.com allow for slightly more extensive credit card searches, and both offer filter services to help you narrow down the field, depending on your answers to various money management questions.

If you're just doing a quick comparison of the headline rates, be wary of the sponsored links (particularly prevalent with savings products) that websites bump to the top of their pages.

Moneysupermarket.com can rightfully call itself the most comprehensive website compared with the other four's range of savings and current accounts. But it's just as culpable when it comes to the dark arts of marketing.

Not only does it list sponsored products first, it also has a misleading 'bestsellers' section, which if you read the description to the side explains bestsellers are "products you can apply for through moneysupermarket.com. To compare all cards use the search tool above."

True, the website is technically adhering to the FSA's requirement that information is clear, fair and not misleading. But the fact that the website has to explain what the bestsellers are is a little questionable.

Whether comparison websites are treating customers fairly or not is currently being investigated by the Office of Fair Trading.

"One of the problems that comes up again and again is that the information displayed isn't as good as it could be, as well as the issue of displaying excess, and I'd imagine they will look at this," says Powell.

In the meantime, how can you decide what site to use? The answer is to make sure you use more than one and shop around.

What to watch out for

• No comparison website covers the whole market, so don't just rely on one

• Insurers Direct Line and Aviva are not listed on any price comparison site, so go direct to their websites

• Automatic high voluntary excesses will make your quote cheaper, but in the event of a claim, can you afford the excess?

• Some websites display voluntary and compulsory excesses together

• Read all the questions carefully and change the default answers where necessary

• Look for hidden third-party data protection tick-boxes and unsubscribe to emails

• Beware of sponsored links and 'best buys' which you may not be eligible for

More on:

• Insurance
• price comparison sites