Home / Analysis / Industry needs to talk about a role for comparator sites
28 November 2011
Comparator sites in the UK are now wielding significant power, especially in motor insurance.
That worries UK motor insurers, who fear the sector becoming unprofitable because price is the main driver.
In Australia comparator sites are growing in number, but their role has split the industry. Some insurers see them as a means to selling products and encouraging people to take out insurance. Others are vehemently opposed to them on the grounds they will cut margins.
Making matters worse is that fact that two different sectors are affected by comparators. The first is direct insurance, where price is the major determinant and where some leading direct brands have refused to allow comparison sites to feature their products.
The other is commercial insurance, where the issue is even more complex, with many saying comparison sites threaten the role of brokers and the profitability of their insurers.
Now the number of comparator sites and their growing influence has attracted the attention of both the Australian Securities and Investments Commission (ASIC) and the Australian Prudential Regulation Authority (APRA).
ASIC has said it will look at comparator sites next year, but the regulator did not return insuranceNEWS.com.au requests for further information on what action it may take.
Informed sources say ASIC will probably issue some regulatory guidelines for operators of comparator sites, some of which take an approach that could confuse consumers.
APRA expressed concern on such sites in its 2011 annual report, pointing out pricing seems to be the driver, especially in sectors where it was a major consideration when buying a policy.
The regulator says the sites succeed in sectors where consumers change insurers often. Some in the industry feel the point has been reached where decisions need to be made about the role of comparator sites.
QBE GM Australian Intermediaries Shaun Standfield says the industry needs to understand what comparison sites could do to the relationship between broker and insurer – not just now, but also through five to seven years out.
“Ultimately what we require is a system which is end-to-end, to ensure we eradicate non-value added activity to the transaction or customer experience,” he told insuranceNEWS.com.au.
“We need to work out if price or advice is the most important things in general insurance. If it is price, then clients will eventually go direct and cut out the broker.
“If this happens, insurers will change their business models to suit what the market wants.
“For brokers that will mean a loss of income.”
Mr Standfield says Australia is lucky in that it can see what has happened in the UK, where comparator sites have driven down prices and raised questions about the profitability of the industry.
Not surprisingly, consumer groups like comparison sites, but worry about their attention to detail.
Choice Director Campaigns and Communications Christopher Zinn agrees the lack of accuracy on many sites is a concern.
“We are keen that the sites are accurate in the information they give consumers,” he told insuranceNEWS.com.au.
“We support the idea of comparator sites, but it is an area that does need some regulatory oversight.”
Another complaint about comparator sites is their lack of transparency.
Michael Gottlieb, MD of professional indemnity comparator BizCover says he has no problem with sites that compare different insurers’ products based on a common assumption, but the real issue is comparators that are not transparent.
“The key issue is the sites that have multiple brands which are all from the same insurer,” he told insuranceNEWS.com.au.
“The lack of transparency from these sites that have just the one insurer behind them is misleading consumers.”
Mr Standfield says QBE is not opposed to comparator sites, but would like to see some debate on what role advice will play before heading down that route.
“In Australia we are told Gen Y wants to look online at products, but still wants advice when selecting a policy.
“Comparator sites aim to eliminate that advice at a time when we are being told it is needed by the next generation of customers.”
Comparator sites are unlikely to disappear, and insurers will watch them carefully if they see an opportunity to cut distribution costs.
If consumers decide cutting out the middleman – the broker – will save them dollars, then comparator sites will thrive.
But what the regulators will do to these sites will no doubt have an impact on their operations and ultimately their success.
And insurers and brokers opposed to them will no doubt be lobbying hard for restrictions and controls to stymie their growth.