David Quick of CETA blogs for Insurancetimes.co.uk.
As a current TV commercial regularly insists, much of the public is “confused” by the multitude of outlets, ranging from banks to supermarkets that now sell insurance products.
If this contention is true, consumers must be more confused than ever if they follow its recommendation and rely on online price comparison sites to choose the best household or motor insurance policy
A host of competing comparison sites has sprung up, each following the maxim that the best insurance product is the one with the cheapest price tag attached. They have proved to be a malign influence on the industry and insurers have done themselves no favours by giving control of distribution to individuals who are not part of the industry and contribute nothing to it.
Nor have these sites offered consumers anything of much value. The true worth of an insurance policy depends on much more than price. Comprehensive cover, clear policies without small print, reasonable excess levels and speedy, efficient service all count for much more. Ultimately, the real test comes when the policyholder has to put in a claim. The aggregators provide none of this vital information.
“The true worth of an insurance policy depends on much more than price.
David Quick
And when low price is the only means by which those insurers without a good quality product can make it to the top of a “best buy” list, too many have resorted to trimming the cover provided by their policy and applying a hefty deductible. While consumers should be alert to such practices, too often they only discover these deficiencies when they claim. The whole industry then gets tainted with the resulting bad publicity.
Kudos then to Direct Line, which has always offered fair value products, for recognising this danger from the outset and for refusing to dance to the aggregators’ tune. Belatedly, but thankfully Norwich Union has followed its lead. If only it had done so rather earlier.
Instead, by leaving it until now we have a market where competition has become so cutthroat that it overrides good sense. Some operators are even ready to slash their profit margins to practically zero, in order that their product can be shown as an online best buy.
This results in absurd situations such as providers earn nothing on a motor insurance policy but relying for any profit on their ability to sell add-on products such as legal expenses and breakdown cover. This risk strategy would be a recipe for disaster even in good times. It’s even more ridiculous at a time when the economy is racing towards recession.
“What is encouraging is that much of the public is quite aware of the limitations of comparison sites.
David Quick
What is encouraging is that much of the public is quite aware of the limitations of comparison sites. A recent survey of users by researchers at GfK NOP found that nearly 80% were wary of claims that they provide the cheapest deal. However, most also said they were convenient and easy to use.
But now that Norwich Union has launched its own rival service – and one that offers to show the price of its rivals’ products even if it suffers by comparison – it has effectively “shot the fox” of the aggregators by offering the same convenience. It’s a move that deserves at least two cheers. We might even have a few less irritating TV ads to endure as a result.
David Quick is managing director of insurance network, CETA.
