FSA to review insurance price comparison sites

The Financial Services Authority (FSA) is understood to be considering a crackdown on websites that compare insurance products. There has been huge growth in the online insurance sector with a significant number of aggregators already established and new entrants poised to enter the online comparison and quotation market.

The crux of the issue with these online aggregation services is to determine whether the act of ranking insurance products online by price constitutes giving financial advice.

Some insurance comparison websites are allowed by the financial watchdog to arrange insurance products but not to give advice.

The investigation comes after the British Insurance Brokers Association (Biba) asked the FSA to tighten such rules.

In order to place insurance business direct with consumers traditional brokers are heavily regulated to give advice.

But Biba argued the current rules covering so-called "electronic introduction" were designed before the development of comparison websites, and therefore did not provide appropriate protection for consumers.

According to research commissioned by Biba, many price comparison websites use assumptions when generating quotes, something a third of consumers did not realise.

It warned this could lead consumers to buy unsuitable insurance products.

After interviewing a small sample of consumers, it said that more half of those questioned who had used price comparison websites felt the differences between insurance policies were not adequately explained.

Only 6% felt sufficient policy details were given.

"There are still too many people logging on, and making a decision solely based on the price of a policy, rather than the protections it offers them and potentially buying an inappropriate policy,”  said Biba chief executive Eric Galbraith.

"I believe the regulator should now look again at developing more appropriate regulations, to ensure that consumers are being afforded suitable protections," he added.

"The current FSA rules were written prior to the growth in aggregator sites.

The insurance comparison site Confused.com commented that it welcomed Bibas call for more regulation into the sector.

The firm indicated that it had already voluntarily invited the FSA to regulate its activities, but it wanted to see a complete overhaul of the rules covering the sector.

Richard Mason, director of comparison site Moneysupermarket.com, which is already fully authorised by the FSA, said he would welcome new guidance from the FSA regulator, but accused Biba of exaggerating the scale of the problem.

"The reality is that price comparison sites do a better job, offering access to a much wider range of providers, including companies that dont sell through brokers, and letting consumers examine the detailed DNA of products before they buy," he added.

The probe is expected to cover general insurance policies, including motor and household insurance.

The FSA regulator is also likely to consider the issue whether the ranking different insurance policy deals by price constitutes giving financial advice to the consumer.

Following its investigation, the FSA could take a range of actions including issuing revised guidance, enhanced supervision, or making changes to regulation.

© Insurance Jobs Board

Staff writer: David Sutherland

Insurance News 22 Jan 2008

News search tags: insurance aggregator, moneysupermarket.com confused.com BIBA, British Insurance Brokers Association, FSA, Financial Services Authority, Regulator, Watchdog, insurance quotes, Eric Galbraith chief executive BIBA. Insurance price comparison sites.