Direct Line hits out at quote comparison websites

Getting a quote to insure your car used to be an activity that could easily consume a weekend. Yellow pages and notebooks arranged about your person, you could spend hours next to the telephone, trying to find the insurer that would offer you the best deal. You’d give the same detailed information numerous times, and usually get promised a call back at the end (which would sometimes never materialise).

This laborious process was effectively wiped out with the rise of price comparison websites. A motorist now simply had to fill in their details online, and at a click of a mouse would see how the various quotes from major insurers compared. They could then complete the transaction by clicking through and opening the policy online. Inevitably, this makes insurers behave more competitively, as their customers have instant access to what their competitors are offering, whereas before the sheer effort required to access the spectrum of quotes would mean some people accepted a deal that could be beaten elsewhere. The rise of the price comparison website has been a typical example of how the internet can act as a champion of consumer choice.

Moneysupermarket.com is the largest of the UK’s comparison websites. Last year it earned £30 million before tax, and should it float on the stock market, as some analysts expect, it will receive a valuation of around £1 billion. Admiral, owner of Confused.com is considering a sale worth around £700 million. However, these mammoth valuations (which are slightly reminiscent of the 2000 tech boom) are now going to be severely challenged. Direct Line is leading the charge of a group of insurers who are attempting to undermine the perceived fairness of these websites. In a high-profile PR campaign, Direct Line, who revolutionised the insurance industry by dealing directly with customers rather than with brokers, argue that "Unfortunately, the middlemen are back. But this time they've gone online, as price comparison sites…they add unnecessary costs and complications to the search for the best deal." They claim that comparison websites are not open about how they make their money, which often comes from commission on completed deals. They also question whether the products being compared are actually like for like.

Royal Bank of Scotland, parent to First Direct (along with other insurers Churchill and Privilege), doesn’t allow its quotes to be listed on comparison websites, but Money Supermarket claims this is because its quotes aren’t competitive enough to feature towards the top of the tables. This campaign should be seen for what it is - an effort by a struggling insurance giant to recover lost market share. However, it could benefit consumers by bringing important questions to their attention. They should be aware, for example, that despite not necessarily favouring one insurer over another, comparison sites are in effect brokers that take commission, rather than non profit sites. It is also essential to read the small print and ascertain exactly what information is being displayed. However, this does not mean that the sites are not useful and time saving. Used by people with the proper awareness they can be a useful and efficient tool of getting a picture of where they fit into the insurance market.

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