Almost 25% of private motor insurance sold in the UK in 2007 was “aggregator instigated” and the UK financial services regulator thought it was high time online insurance comparison websites were subjected to “Thematic Review.” The results were not perfect as Louise Ball reports.
Topic: Financial services
Who: The Financial Services Authority ("FSA") thematic review into insurance comparison websites
When: May and November 2008
Where: UK
Law stated as at: 20 December 2008
What happened:
In May and November 2008, the FSA published the findings of its thematic reviews into general insurance comparison websites.
The May review of 17 insurance comparison websites was prompted by the significant increase in consumers using online databases to seek out quotes for general insurance products such as motor and home insurance: Datamonitor research in March 2008 suggested that almost 25% of all private motor insurance sold in 2007 was insurance "aggregator-instigated". The FSA focussed on whether such aggregators were treating customers fairly, a precept of the regulatory regime, and whether information provided was clear, fair and not misleading.
This website review was followed in November by a series of visits to a number of firms representing over 50% of the market in terms of sales volume.
Findings
- In the course of its May review, the FSA found that on the selected websites:
- assumptions used to generate quotes were not always shown;
- where comparison is based on price only, customers should be made aware that the products being compared may have different features, and that features other than the price should be taken into account before purchasing a policy;
- incorrect or out of date information was provided; and
- a misleading impression was given of the scope of the market coverage.
In addition, brokers and insurers are under an obligation to give the customer information in good time before the conclusion of the contract, in one case the customer obtained information on coverage and features of the policy only after committing to it.
By the second stage of the review, many firms had made significant improvements. However the FSA identified two specific concerns, first for websites to have information about the level of excesses that apply to insurance policies, in particular compulsory and voluntary excesses, and second, as stated in the May review, assumptions about the consumer must be set out.
Headline points
The FSA set out its expectations in the conclusion to its November review. In order to comply with the obligation to provide clear, fair and not misleading information, firms must:
- ensure that any assumptions about the customer used to generate quotes are clearly and prominently displayed on the website and at all stages on the consumer's online "journey" so that the consumer is aware of these assumptions;
- provide clear and accurate details about policy excesses;
- ensure that any statements in their advertising and communications materials are factually correct, accurate and up-to-date;
- avoid creating adverts that give consumers an unrealistic perception of the market coverage of the aggregator;
- ensure any price/savings claims in their advertising are meaningful to the target audience and a fair representation of what they can be expected to receive.
Why this matters:
Overall, the thematic review ends on a favourable note, with firms responding positively to the FSA's expectations. It will be interesting to see whether any similar comparison websites shall be subject to the FSA's scrutiny over the course of 2009.
