Can you trust comparison sites? | This is Money: "Can you trust comparison sites?
Liz Phillips & James Coney, Daily Mail
13 February 2008
Can you trust comparison sites?
Liz Phillips & James Coney, Daily Mail
13 February 2008 Comparision websites are supposed to make our lives easier.
The idea is these internet-based companies can examine thousands of car or home insurance policies, mortgages, loans and credit cards in an instant and find the best one for you - saving you time and money.
They have become big business. More than two out of every three car insurance policies sold last year were done through the 17 leading, and handful of smaller, comparison sites in the UK.
And you can't fail to notice them. Those shouting the loudest with big budget ad campaigns are Moneysupermarket.com, Confused.com, GoCompare, Comparethemarket, uSwitch and newcomer TescoCompare.
The biggest, Moneysupermarket, got more than 4.5m separate visitors in just one month last year, and took 55% of the market. In all, 10m people a year pay separate visits to look at its mortgages, motor insurance or home insurance.
Sites make their money by picking up commission for each customer they send to the provider or when a successful sale is made - they get around £45 for each successful credit card sale generated by the site or £3.50 per click through to the provider's site. They could pick up as much as £100 if you take out a loan.
They also get money from companies advertising on the site, and some by passing on your personal details to other salespeople.
What's the catch?
The British Insurance Brokers Association recently claimed that the sites make assumptions that have misled consumers into making the dangerous mistake of taking out insurance they will never be able to use.
And they have angered independent financial advisers who must spend thousands of pounds a year to comply with the strict sales rules of the City watchdog Financial Services Authority when they make a recommendation.
The FSA is considering bringing in similar rules for comparison websites. The main complaint is the lack of consistency. Consumers expect comparison sites to find them the cheapest deal available. But while the results you get back may save you money, a cheaper deal can often be found elsewhere.
Then there is the issue of independence. British Gas and BT have both had issues with comparison sites in the past. They complained they were unfairly represented in best buy tables because they did not have a commercial arrangement with the website. A frequent complaint will be that sites have headings such as 'Editor's Choice' or 'Best Rate You Can Get Online Today'.
These aren't necessarily the cheapest deals, but the ones that will make the comparison site the most money. However, it is not hard to see how you could be misled into thinking that these results are the cheapest. Some companies even specifically bring out products with low rates to get in to best buy tables.
The problem with this is that there will be a lot of clauses and small print adding to the cost. Another frequent complaint is from customers who don't get the price they are originally quoted on the comparison site. One reason is that this quote is not in real-time, so it is only an indication.
A second reason is that most sites only ask for a limited amount of information and then make a series of assumptions to fill out the forms. If your circumstances don't fit these assumptions then the final quote you are given from the insurer is likely to be far higher.
When it comes to savings, mortgages and credit cards best buy tables are not all they seem. With credit card and loans, most lenders give 'typical rates' which means you may get a vastly different interest rate quoted based on your track record of handling credit when you fill in an application.
Criticisms are that savings rates are artificially boosted by short-term bonuses - something Money Mail's savings tables never take into account. It something Nationwide is campaigning to have included in the Banking Code.
Mortgage tables usually disregard higher lending charges which can be levied on loans amounting to more than 90% of the price of the property. Arrangement fees based on a percentage of the loan that are uncapped can be astronomical on larger mortgages - but the provider could still be at the top of the table if it offers the cheapest rate.
What we found
Money Mail compared the sites using two typical scenarios - one for motor and one for home insurance. The difference in price can be huge. And the way the sites work differs massively, too.
Research from data compilers Defaqto found that just over one in ten of those looking for car insurance were given the same premium by the insurer as they received on the comparison site. Of the three leading comparison sites for credit cards the best buys for balance transfers and purchases differed widely.
The top three for Moneysupermarket, Confused and uSwitch were all different. Insurance is one area where the differences are most marked. We were baffled trying to understand which insurers appeared on each site.
TescoCompare has a panel of just 30 insurers. They go to for quotes in the same way as a traditional broker will do and claims Lloyds TSB, Nationwide, Churchill, Privilege, Prudential, Virgin and Tesco don't appear anywhere else. You can compare the product features of the cheapest four, but we found it refused to give the next four's details despite six attempts.
Confused.com meanwhile, says it covers 97% of car insurers compared with just 70% of home insurers and 100% of energy companies. But its site proved confusing when looking for home insurance. Because one section was filled in incorrectly we had to start again and, in all, took an hour to complete the search.
Comparethemarket's home insurance form didn't ask for the value of contents, items away from home and high value items. Its cheapest quote came out very low, but its quotes are likely to be inaccurate. With Gocompare we didn't appear to be able to increase the cover for items away from home from their automatic £750 to £2,000.
