The Financial Conduct Authority (FCA) has found that some price comparison websites operating in the general insurance sector are failing to meet consumers’ expectations of them and, in some cases, the FCA’s regulatory standards.
In a thematic review published today, the FCA found that the websites did not always ensure that consumers were given the appropriate information to help them make informed decisions. This is particularly important as FCA is concerned that consumers’ focus on headline price and brand when using PCWs could distract from crucial product features such as policy coverage and terms.
By failing to provide clear information, the websites are increasing the risk that consumers may buy products without understanding key features such as level of cover or excess levels and purely focus on the price. While a few websites did provide this information clearly the level of clarity varied significantly depending on the provider.
Clive Adamson, FCA director of supervision said:
'Price comparison websites have increased in popularity among consumers with an estimated one third of consumers buying their motor insurance policy through them. They provide an important service for millions of consumers bringing convenience and simplicity to buying financial products online.
'However, our review found that they were not meeting our requirements in delivering fair and consistent outcomes for consumers. We also found, through our consumer research, that consumers had a number of misconceptions about the services they provided.
'We expect price comparison websites to take on board the findings of the review. It is also important for consumers to understand that not all products are the same and the cheapest product may not always be the best for their needs.'
The other key findings of the FCA’s review were:
- Price comparison websites did not make clear their role in the distribution of the product or the nature of service they provided. For example, some consumers mistakenly believe that the price comparison website had provided them with quotes on the best policy for their individual needs and had assessed the suitability of the policy for them.
- Not all comparison sites, that were part of a larger group of an insurer or broker, disclose this potential conflict of interest, which is against FCA rules. However, the FCA found no evidence that these firms used this relationship to their commercial advantage.
- While some price comparison websites had taken steps to comply with their regulatory obligations they had failed to fully implement Guidance published in 2011.
The FCA has asked price comparison websites to take action on the specific areas identified where they are not meeting the required standards to ensure customers get a product that meets their needs.
Notes for editors
- The FCA’s review[1] looked at 14 price comparison websites between December 2013 and April 2014 and also included in-depth consumer research with 50 participants.
- The 2011 Guidance on price comparison websites[2].
- The FCA took over responsibility for the regulation of 50,000 consumer credit firms from the Office of Fair Trading on 1 April 2014.
- On 1 April 2013 the FCA became responsible for the conduct supervision of all regulated financial firms and the prudential supervision of those not supervised by the Prudential Regulation Authority (PRA).
- The FCA has an overarching strategic objective of ensuring the relevant markets function well. To support this it has three operational objectives: to secure and appropriate degree of protection for consumers; to protect and enhance the integrity of the UK financial system; and to promote effective competition in the interests of consumers. These statutory objectives are outlined in the Financial Services Act 2012.
- Find out more information about the FCA.