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Price comparison sites falling short of regulatory standards, warns FCA

Out-Law News | 18 Jul 2014 | 12:33 pm | 3 min. read

Aggregators of prices for insurance products are not providing consumers with sufficiently clear information about the policies on sale via their websites and are falling short of full compliance with their regulatory obligations, the Financial Conduct Authority (FCA) has said.

The regulator also said that the aggregators had failed to make clear the role they play in the distribution of insurance products and services and ensure that they always acted in the best interests of consumers. Some of the price comparison websites (PCWs) have not fully implemented guidance issued by the FCA's predecessor, the Financial Services Authority, in 2011 relating to their regulatory obligations, it said.

The FCA highlighted its concerns in a new report that outlines the results of a thematic review into price comparison websites in the general insurance sector (27-page / 246KB PDF).

"Price comparison websites have increased in popularity among consumers with an estimated one third of consumers buying their motor insurance policy through them," Clive Adamson, FCA director of supervision, said in a statement. "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," he said.

In its report the FCA said the price comparison sites it reviewed had "not always taken reasonable steps to provide sufficient, clear and consistent information on the level of cover, key features, exclusions and limitations to enable consumers to compare the available options and make an informed decision". It also highlighted discrepancies between the level of policy excess they had asked for and the corresponding quotes they were provided.

In addition, the regulator raised concerns with the way information on so-called insurance 'add-ons' were displayed to consumers. It said in some cases the "main features" of those products had not been sufficiently explained, and that neither had other aspects of those products, such as price, level of cover and any limitations or exceptions that applied. Some of the tools used to explain whether certain add-on products were included in the cover being purchased were not always accurate and could have mislead consumers into "making inappropriate decisions", it said.

"We found that the level of product information provided and the way that it is presented can be a barrier to informed decision-making by consumers," the FCA said in its report. "This is not consistent with our requirements… As a result, there is an increased risk that consumers may not be achieving fair outcomes when purchasing their GI policy through the use of PCWs."

The FCA said that information about the role price comparison sites play in the distribution of insurance products was too hidden in generic locations on the sites and not positioned centrally enough to "the quote journey" where consumers could access it more easily. It said that research it had conducted showed some consumers "mistakenly believed" they had received advice or guidance from price comparison sites on what policies to select.

Information about the fees price comparison sites receive for their role in distribution was not easy to find, the FCA said, whilst other information that claims price comparison sites cost nothing to use for consumers "could be misleading" because there may be "indirect costs" borne by the consumer, it said.

Among the other concerns raised by the regulator was a lack of sufficient data security in place at some price comparison sites it assessed.

"We found that a small number of PCWs did not have secure access controls to customers’ accounts," the FCA said. "The only requirement was a combination of two or three pieces of information, such as quote reference, date of birth, surname, and postcode to access a customer account, and this information was readily available on the printed quote. This lack of access controls exposes the consumers to the risk of sensitive information being inappropriately disclosed and the PCWs to the risk of reputational damage if things go wrong."

The FCA called on price comparison website operators to address the concerns it raised and said it would follow up with individual sites it had assessed to review the steps they take to improve compliance.