Caroline Muspratt says aggregator websites are a mixed blessing for insurers and brokers
Aggregators like Confused.com and MoneySupermarket.com are gaining an increasingly important slice of the general insurance market, as customers hunt for the cheapest deal. However, this doesn’t necessarily mean customers’ decisions are based on price alone, or that the death knell has sounded for brokers.
Aggregators do on the whole save consumers both time and money and many insurers are realising that this is a channel they cannot ignore. More and more aggregators are springing up and it was reported recently that Saga, the organisation for the over 50s, is planning to launch its own price comparison site for insurance products aimed at older customers, while Tesco Personal Finance is said to be considering setting up its own aggregator in conjunction with Royal Bank of Scotland.
However, not all insurers have been so quick to jump on the aggregator bandwagon. Norwich Union prefers to attract customers to its own website, where it offers customers an alternative to their own products. And RBS’s Direct Line has a policy of not participating in aggregator sites.
The basic premise of an aggregator is that it lists policies according to price, which has both advantages and disadvantages for insurers.
Few insurers would want to jeopardise their position at the top of the list by increasing prices if their competitors were not doing the same. This will potentially damage efforts by motor insurers to push prices up to cope with the rising cost of claims.
On the other hand, smaller companies that cannot afford to spend so much on marketing but offer a low rate will get more exposure via aggregator sites.
However, some in the industry believe that customers will look at the results thrown up by an aggregator and pick the cheapest quote from a company they have heard of, ignoring names they are unfamiliar with.
This underlines the importance of marketing, but also suggests that consumer decisions are not based on price alone but also on some impression of quality and customer service.
On that basis, it is perhaps wrong to predict the disappearance of the traditional broker model. It has been suggested that as direct insurers see their profits diminish, due to the growth in aggregators, they will invest instead in their broking channels.
Commercial customers are more likely to continue to use brokers, for the specific and personalised service they receive, while personal lines customers who buy more ‘commoditised’ insurance products, particularly for the car and home, will probably shop around online.
However, business sourced via aggregators has been found to have lower customer retention levels, as customers do not feel loyalty when using a price comparison site. Insurers will need to work harder to make sure they gain repeat business.
In addition, most aggregator sites are relatively simplistic in that they allow customers to see prices but not the small print of what the policy includes.
The best aggregators would be ones that allow customers to view information on what is covered by the policy, the amount of excess and so on. This would also benefit insurers which own aggregators, as their websites would stand out from the rest, putting them ahead of the competition. IT
‘ Caroline Muspratt is insurance correspondent at The Daily Telegraph