While the OFT investigates product comparison websites generally, the UK’s insurance industry has moved to head off tighter laws in their patch by introducing a voluntary guide for online insurance policy comparisons. Jonathan Meerkat, sorry Mayner reports.
Who: Association of British Insurers
When: December 2009
Where: United Kingdom
Law stated as at: 25 January 2010
On 29 December 2009 the Association of British Insurers published a Good Practice Guide (the "Guide") for firms engaged in the online insurance price comparison market. The Guide, which is titled "Ensuring Positive Customer Experiences of Buying Insurance Online", was produced in conjunction with the British Insurance Brokers Association, the consumer group Which?, a number of leading comparison websites and other stakeholders.
In May 2008 the Financial Services Authority (the "FSA"), prompted by significant growth in the industry, published a review of 17 insurance comparison websites which examined whether such websites provided customers with information on insurance products in a way that was fair, clear and not misleading, in accordance with regulations governing financial promotions in the UK. This desk-based review of the websites was followed by a further review (published in November 2008) during which the FSA visited a number of firms which together represented more than 50% of the insurance price comparison market by sales volume at the time.
These reviews highlighted a number of concerns about assumptions made during the quotation process and the accuracy, transparency, comparability and presentation of product information.
Click here to read Marketinglaw's summary of the FSA's 2008 reviews.
The Good Practice Guide
The Guide establishes high-level standards across seven areas, summarised below, which address the concerns highlighted by the FSA.
The information provided to customers should enable them to understand what an excess payment is, and how much they will be expected to pay towards any claim against the policy. As such, voluntary and compulsory elements of the excess will need to be clearly indicated so that customers are fully aware of the true cost of their policy.
Customers should only be provided with quotations which are consistent with the type of cover that they have requested. It should also be clear which features of the cover are being provided as part of the standard policy, and which are being sold as an add-on. An add-on is additional cover to a standard insurance policy such as personal accident, legal expenses or home emergency cover. Any additional add-ons should be clearly identified and customers should be made aware that the cover provided by such add-ons will vary between providers.
Total Price Disclosure
The total price of the insurance should be clearly provided so that customers should understand the total price of the policy. The cumulative total of instalment payments and any APR should also be shown if appropriate. The Guide places the onus on insurers and brokers to provide price comparison websites with all the information that they need to enable them to comply with this standard.
All quotations should be based on accurate information about the customer. Customers should be encouraged to enter accurate data about themselves or their risk to ensure that they are properly informed as to the policies that best suit their requirements and risk. Websites which utilise "helpful hints" features should be careful that customers are not unreasonably tempted to trade honesty (and effective cover in the event of a claim) for the lowest premium, and warnings about the consequences of providing inaccurate data should be provided.
Additionally, customers should be required to provide answers to every question in the quotation process and the provision of default answers by the websites should be avoided, or at least minimised and highlighted when the quotation is provided.
Assumptions about the personal details and policy requirements of the customer are often used by comparison websites as they allow comparable quotations to be generated quickly. Customers should always be made aware what assumptions (if any) have been made in the course of the quotation process so that they can ascertain if the assumptions underlying the quotation accurately reflect their personal details and requirements.
All quotations should state how long they are valid for so that customers are fully informed as to pending price changes.
Customers should be able to review the key features of their policy before they commit to a purchase. Responsibility for maintaining this standard will lie with insurers and brokers who must ensure that they draft and provide key features summaries which contain sufficient detail on significant exclusions to the policy to enable customers to make an informed purchasing decision, and ensure compliance with the FSA's high-level rule that insurance promotions be fair, clear and not misleading.
Referrals and signposting
The final recommendations in the Guide are intended to benefit customers such as those who live in areas of high flood risk or the elderly, so-called "non-standard" customers. Where a comparison website or other insurance distributor cannot provide a quotation to a non-standard customer, they should ensure that such customers are not excluded from the market by providing helpful information as to where they may be able to find assistance and / or cover.
Why this matters:
While adherence to the Guide is voluntary, it is designed not only to ensure positive customer experiences, but also to enable insurance distributors to avoid disciplinary action by the FSA for breaches of financial promotions regulations. As such, while the recommendations in the Guide are most relevant to price comparison websites, it applies also to any online distributor of insurance products as well as to brokers and insurance firms who should ensure that they provide sufficient and accurate information about their products to comparison websites.
Consumer groups and the FSA will likely be watching closely to see how well the guidance taken up and implemented. The ABI states in the Guide that it will carry out regular reviews to establish how widely it is being implemented, and to identify any new issues that need to be incorporated into it.
A copy of the Guide can be downloaded from the ABI's website here.