FSA Criticises Car Insurance Comparison Sites

Insurance comparison sites are springing up at a rapid rate, as new entrants emerge onto the market every day to give confused.com, moneysupermarket and gocompare a run for their money.

But how valuable are comparison sites?

I've previously looked at sources of bias, and lack of market coverage, but this week the FSA came back with their assessment of the state of the market, and in particular how it affects customers.

It's the specific examples of bad (and good) practice that are interesting, as the problems will resonate with anyone who has spent much time on the different aggregator sites.

Here are some of their findings of bad practice by car insurance comparison sites:

Some sites have...

"Notification that assumptions have been used to generate quotes, but no indication of what those assumptions are."

Helpful if you click through only to find out you are not eligible for that particular quote because of that SP30 you picked up 2 years ago.

"Using price as the sole basis for "comparison", but not advising consumers that they should consider other factors, and that the difference in price is likely to reflect the different levels of protection offered by the policies."

This is pretty major. Anyone can put a policy together that's cheap, as long as they leave out most of the features that normal people might actually want. Even Swiftcover, who compete as aggresively on price as anyone, know that, as demonstrated by their own news release on unwitting assumptions made by drivers on levels of cover.

"Not listing all benefits provided by the policy, and not providing information on the basis for listing the benefits nor advising consumers that policies may have other benefits not listed."

Not listing all the benefits makes it very hard to do a truly fair comparison without ringing the insurance companies concerned, which would kind of defeat the point of the aggregator site. Imagine if you had two quotes around £10 difference in price. What the FSA are saying here is that the second place quote could have free breakdown, legal and accident cover, but you would never even know.

"Not making it clear that the policies listed did not all contain the provisions or benefits specifically requested by the consumer."

Can you believe this. You've asked the comparison site specifically for quotes with protected no claims bonus, and then the site ignores you and returns policies with and without the feature you'd asked for. And this actually happens. It's easy to see some very tricky situations developing here in the event of a claim.

"Providing a figure for the "total excess", when in fact this is only the voluntary excess and a further compulsory excess will need to be applied. In one case, a further compulsory excess of £320 was applicable. The compulsory excess figures quoted on the site were provided as the actual level of excess to be applied, but were shown to be incorrect when compared to the broker's or insurer's website. In one case a figure of £100 was given for the compulsory excess, but in fact the actual compulsory excess applicable was £475."

Ouch! This may just be poor programming, but it comes across as dishonest. By the time you would find out about this you are probably well into the 'winning' quote's site, and would probably be dubious about checking the other results in case the same happened again.

"The quote given on the comparison site differs from the quote given on the brokers or insurers website, but no information has been changed and no additional questions asked to warrant a change in price."

This is the one that most people notice, and possibly stems from a different set of assumptions (but why?). Again it comes across as being something like a con if the price has 'revised' upwards.

"The information provided by the consumer to the comparison site is incorrectly passed to the broker or insurer."

The whole point of comparison sites is that 'You only have to enter your information once' so this just seems shoddy.

"Figures given for the cost of optional extras are incorrect. In the majority of cases seen where the cost was incorrect, the comparison site underestimated the cost of the optional extras."

Why? Are they just guessing, or do they not think anyone cares about the price of car insurance optional extras?

"The quote given by the comparison site excludes certain features (for example legal assistance and breakdown cover), but these features are then automatically added to the final quote price when proceeding through to payment on the broker's or insurer's website."

I think we have to let the comparison sites off this one, to be fair. The fault here is the broker or insurer applying the old thetrainline.com tactic of whacking on all the optional extras by default, which is annoying, but hardly the aggregator's fault.

So what can you do about this?

Well as the FSA have decided, in their wisdom, not to 'name and shame' the aggregator sites which are getting away with these poor quality features, it's down to you as the customer to keep an eye out and beware of misleading information. Saying that, it is true that insurance comparison sites perform an important service, and help you narrow down some of the thousands of options and get a ballpark figure for your quote. Saying that, I would also recommend that everybody should ring a couple of direct insurers, and at least one specialist insurance broker (like us for example - if you need a quote, call us on 08000 83 88 33).

There are many companies that still don't appear on comparison websites, despite the misleading claims (according to the FSA) of almost total market coverage by some of the aggregators.

What's more, specialist brokers may well have a specialist scheme that fits your situation, and here at Adrian Flux we have over 200 such schemes with 40+ insurers on our panel, so you may well be special without realising it, and that could save you lots of money. The third reason you should consider a broker, is that the broker can take many more factors into account than any comparison site, and more importantly, we only need to ask the questions that are relevant to your situation. Some of this can only be done over the phone, when we can talk to you direct and treat you as an individual.

In any case, if the FSA is to be believed, you need to be careful before accepting comparison sites at face value.

Young Driver Insurance - To Front or not to Front?

I've mentioned fronting in a previous post outlining the perils of lying to your insurance company, but right now fronting - the term for when a young driver insures their car in the name of an older relative (usually mum or dad) - has been in the news of late.

The news is that many insurance companies are getting tough with fronted policies. In fact, several high profile insurance companies have recently stopped accepting fronted risks. And on Saturday a Moneybox programme on Radio 4 (you can currently listen to it here) covered the issue, and has prompted a heated online debate on fronting.

The most worrying thing from a young driver's point of view was the mixed messages coming from companies like esure. Despite the fact that esure currently allow the purchase of a fronted policy, their spokesman said:

"Any act of deception to try to get a lower insurance premium with your insurance company is tantamount to fraud."

If I were an esure customer insured in my mum's name, I would be very concerned about a statement like that. It suggests that if you were to make a claim, you could be in serious trouble. And as if to underline that the whole industry is clamping down on the practice, the head of the Association of British Insurers (ABI), Nick Starling has recently commented:

"Insurance cheats are more likely to be caught than ever before. And cheats will pay a high price as future insurance and credit will be more expensive and harder to obtain."

And don't bother running to the insurance ombudsman either if you're refused a claim over fronting. Says Peter Hinchcliffe, lead insurance ombudsman:

"If you are the parent and you have said you are the main driver and the car has been in an accident, or stolen, at your son or daughter's university, you have got a lot of work to do to explain how that has come about."

So what's the solution?

At Adrian Flux the problem of fraudulent fronting is simply not an issue for our customers. We do not accept any risks that are, or appear to be, fronted. We always rate our insurance quotes based on the highest risk driver, which, the statistics show, is usually the youngest.

If all insurance companies took this line there wouldn't be a problem.

If there were no fronting, there would be benefits for everyone. All middle aged drivers would get lower premiums, because their statistics wouldn't include so many claims by their children.

And believe it or not younger drivers might wind up with a cheaper premium too. No, really. Being insured on your parents policy is all well and good, but the problem with this is that you do not accrue any no claims discount of your own (see note)*. Since no claims discounts are pretty hefty for younger drivers, you could well end up paying less over a period of a few years simply by getting your own policy.

But if all this hasn't been enough to convince you that fronting is a bad idea, then please read this informative post on fronting from the Max Power forum.

Here are some tips for cheaper young drivers insurance:

• Do Pass Plus, IAM or Max Driver - that will save you up to 40%.
  
• Think about insurance when you buy your car - one of our top 10 cheapest cars for young drivers might be for you.
  
• When you get a quote always answer all questions truthfully, otherwise you might be in hot water.
  
• Before you do any modifications, check to see what impact they will have on your premium. Believe it or not, some mods can reduce your premium, and we can offer modified car insurance to young drivers, but be aware if you're planning to fit turbos and a nitrous kit to your Corsa, your quote may well be beyond your budget.
  

*Direct Line do of course advertise named driver No Claims Discount, but in practice this may not be transferable to other insurers, so you could find yourself stuck with Direct Line when you decide to take out your own policy. You might be happy with this but bear in mind that many people think that the real reason that Direct Line hate comparison sites is that Direct Line's prices are simply very expensive when compared with other quotes!

Who owns your insurer?

Direct Line vs Confused part 5.

One of the complaints that Direct Line made about the aggregators was about the ownership of the comparison sites, suggesting, I suppose, that perhaps the price comparison sites might be biased in favour of their owners.

What many people don't realise is that many of the competing brands of insurance advertising on your TV screens every day are all owned by a relatively few companies, and very little mention is made of the links between them.

Direct Line have been very quick to point out the following ownership issues with the aggregators, but after reading the whole of this post, you might decide that they have been lobbing stones from their own glass dwelling.

Confused.com owned by Admiral. Yes, that Admiral. They also own elephant.co.uk, Bell Direct and Diamond, the womens car insurance specialist.
GoCompare are "independent" but have received a £30m loan from esure. If they can't pay esure back in cash, esure become a major shareholder. That's according to the Insurance Times.
Compare the Market is owned by Budget. This one is a bit naughty, as all of the brands quoted are Budget group companies - but they don't make that obvious - they also own Dial Direct and Junction who run the insurance arms of the Post Office, Marks and Spencer, Debenhams, Bradford & Bingley, Homebase and yesinsurance.com.
MoneySupermarket have just floated (in what was described as an "unfortunate" stock market debut, they failed to raise as much cash as had been hoped for, partly due to a recent Google penalty for link spamming which saw their web traffic shrink alarmingly!). As such they are independent.

So much for the main price comparison sites, what about some of the other big insurance brands?

HBOS Group owns Halifax Insurance, esure, Sheilas Wheels and First Alternative.
Royal & SunAlliance owns More Than
GroupAMA owns Carole Nash & Lark
AXA owns Swiftcover and offers quotes as Lloyds TSB Insurance and insurance.co.uk
AON owns Firebond & Footman James
IAG owns Hastings Direct and Equity

There are loads more like this, but finally we come to

RBS Group - the Royal Bank of Scotland Group includes our old friends Direct Line, plus Churchill, Privilege, NIG as well as insurance sold branded as Tesco Insurance, Natwest, Virgin Money, MBNA, BMW Insurance, MINI Insurance, Mint, Egg, Nationwide, Age Concern, Vauxhall Insurance and several others!

Of course, I'm sure none of those brand affinity deals count as middle men, at least to Direct Line's way of thinking. And I'm sure Direct Line think that everyone must know that they are part of a larger insurance group, otherwise they wouldn't have made such a big fuss over the ownership of the price comparison sites. And I'm sure that none of the RBS Group would ever use a price comparison site, much less run one, given the arguments put forward so forcefully by Direct Line.

That must be another company starting up tescocompare.com, then, registering the domain name and taking out a trademark. And it must be a different

RBS Insurance, whose brands include Direct Line and Churchill, is understood to have invested millions of pounds in the venture.

All this makes me very grateful to work for a family owned specialist car insurance company - my life would be very confusing if I had to reconcile multiple sets of brand values that were pulling in different and mutually contradictory directions!

But for the customer - beware and make sure that when you ring round you are actually getting quotes from more than one company. And if you call us on 08000 838 833, we'll impartially check our panel of over 40.

Update 21/09: Well what do you know! Tesco Compare has launched with a whole load of RBS Group brands offering quote comparisons "that you can't get anywhere else" (although no Direct Line, of course) along with a large quota of HBOS companies.

Policy Add-ons - Useful or useless?

This is part four of my analysis of the Direct Line / Confused.com war of words.

Another prong of Direct Line's assault on the aggregator websites was a claim that there was no information on policy features and add-ons provided by the price comparison sites, and that often the prices are cheap because the policy is very basic.

On the face of it, this seems like a reasonable point, but some of the aggregators do allow you to compare other features of the policy and there are other reasons that we shouldn't accept this argument on face value.

Lets take a look at some of the "great" policy features that Direct Line brag about to their potential customers:

• Named drivers earn their own no-claims discount: This, along with the advert used to illustrate it, seems to me to be a tacit admission that many of Direct Line's policies are what are called fronted risks. This is insurance jargon for insuring your car in the name of your parents, or another elder relative, and most insurers consider this a form of fraud and some will decline to pay out if they establish that a named driver is actually the main user of a vehicle if this has not been clearly stated at the time the policy was taken out. Adrian Flux will usually decline to offer a quote on anything that looks like this situation, but that's not to say you can't get a discount for driving experience you have built up while covered on someone else's policy - if this is your situation, ring us on 08000 838833.
• Match your no claims bonus on a second car plus 10% discount for second cars: As specialist insurers with lots of classic cars, kit cars, cherished cars and show cars on our books, many of the cars we cover are second cars, or even third, fourth or 38th cars. As a result we've been offering matched No Claims Discounts for years, and that applies to standard cars as well. In fact if you have more than a couple of cars we can offer multi car insurance or a family fleet policy. And our discounts for second third and fourth cars can rack up to substantially more than 10%, because we know that you can't drive everything at once.
• Keep your no claims when you are hit by an uninsured driver: Sounds great doesn't it, but there are a few catches here. First off you need to give Direct Line the registration number of the offending vehicle. No good at all for those numpties who hit your parked car while you're shopping nor if the criminals (which is what uninsured drivers are, after all) speed off without giving you a chance to eyeball their plates. They'd also like you to collect the uninsured driver's details "if possible". You could just get a protected no claims policy which would protect your no claims discount, whatever the cause of your claim. Most companies now offer this feature for a small additional premium.

That of course is the point. All of these features come at a cost, and the customer has to pay for these features.

With a specialist car insurance broker, like Adrian Flux, you can ask for policy features that match your needs and we will do our very best to find a company with a policy that offers what you need. You may pay a little extra for the additional benefit, but most people would agree that that's only fair.

But if you're with Direct Line, you are paying for the provision of those named driver benefits and uninsured claim NCB protection whether you want them or not - through a higher premium. And what's more, you may find yourself with a restricted choice at renewal time, as virtually no other insurer will decide to accept their named driver no-claims discount (that is the case at the time of writing anyway)

As I said earlier in the post, we would be able to offer an introductory discount for driving experience as a named driver, but younger drivers may well, in years to come wish that they had just got insurance in their own name with their own NCD.

And while we're on the subject of policy features, most customers these days have grown used to the fact that most comprehensive policies now include a courtesy car while yours is off the road as a standard feature. Direct Line don't.

Nor do they include free legal cover.

I haven't heard them mention that in their ads, though.

Direct Line Aggregator Bashing Part 3

Some more analysis of the Direct Line spat with confused.com and the other aggregators.

Another avenue that Direct Line have cited as a problem with aggregators is the "jumping quote" syndrome, where you get a quote from the aggregator, only to get a different, higher quote when you try to take out the policy.

In reality there are several reasons why an initial online quote might be modified when you try to take out the policy, none of them are entirely the aggregator's fault. In fact many of the problems are also faced by brokers, who also have to deal with a panel of insurers with differing rules and requirements.

First off, the questions the aggregator (or indeed broker) initially asks may not be the same as the questions that the insurer wants to ask. There may well be factors that an insurer takes into account that have not been accounted for by the designers of the "one easy form."

Second, the proposer may have omitted certain information about the risk, whether deliberately or not, that the insurer may be in a position to pick up on more easily than the aggregator could.

Thirdly, it is usual for quotes to be valid for a set period of time, which may well vary. If you come back to the insurer after that time, the quote may have gone.

Fourthly, some quotes assume an online discount which will not apply if you ring in to take out a policy.

Of course Direct Line choose to get out of these difficulties by not making their rates available to aggregators at all, the form on their website, which they have designed is the only one you can fill in for a Direct Line Quote. There would be real problems if their quotes varied in the same way between web form and policy go-ahead.

Direct Line vs. Confused.com

There's been a lot in the papers about the spat started by Direct Line, whose wheeled telephones (more of those in another post) have been gracing our screens for many years. As you may have seen, their recent commercials have pulled no punches in exposing perceived shortcomings with the price comparison "aggregator" sites, like confused.com, gocompare and insurancesupermarket.

They've suggested that the comparison sites are too focused on price and take no account of added features, such as courtesy cars, or the weird and wonderful extras that Direct Line attach to their policies, whether you want them or not.

This has sparked a full on barney between Direct Line and the aggregators.

First, Direct Line's blanket TV ads accused Confused, Money Supermarket, Go Compare et al of numerous alleged offences:

1. deceiving the public by not being open about how they were funded.
2. providing cheap quotes which go up when you try to take out cover.
3. not offering extras and add-ons.
4. not being honest about who owns them.
5. that many people did not realise that not all insurers appeared on the price comaprison sites.
   

So then the comparators struck back, pointing out Direct Line's own shortcomings. But Direct Line were on a roll and promptly produced new research claiming they were the cheapest insurer. This research came across as a little suspect from the off, as DL were defined as the cheapest "major insurance provider" on the basis that they "were amongst the three cheapest providers" 257 times out of 1000 quotes.

So MoneySupermarket released figures that showed that in many cases Direct Line wouldn't even get into the top 10 quotes on their site, and suggested this was the reason that Direct Line hated comparison sites.

In all of this, brokers like us seem to have been ignored, although our record levels of business so far this year would suggest that there is plenty of opportunity for the old sort of "middle man".

So let's have a look at this in a bit more detail. Over a few posts I'll be asking some pertinent questions.

• What about the points raised in this spat between Direct Line and the aggregators?
• And who should you choose, a direct writer, comparison website or broker?

Some of the answers may be surprising!