The UK's Financial Services Authority (FSA) is set to review the regulation of insurance comparison sites amid concerns that current rules do not adequately protect customers.
The watchdog is launching a review following warnings from the British Insurance Brokers' Association (Biba) that the current Insurance Conduct of Business rules for "electronic introductions" are outdated as they were finalised prior to the development of price aggregation Web sites.
The trade body commissioned FWD Research to question 250 insurance customers on the issue and found that the vast majority of consumers - 93% - expect insurance comparison Web sites to be regulated in the same way as insurance brokers, but this is not the case.
The study also found that a third of consumers did not realise that the Web sites used "assumptions" as the basis for quotes, which could lead to consumers purchasing a policy which is not appropriate for them, says Biba.
Around 84% of insurance buyers feel that the details of insurance policies offered via price comparison Web sites can be "confusing", while around half of those surveyed say they don't fully understand the difference between each insurance policy offered. Only six per cent of those who have used a comparison site think sufficient policy detail is provided.
"There are still too many people logging on, and making a decision solely based on the price of a policy, rather than the protections it offers them and potentially buying an inappropriate policy," says Eric Galbraith, CEO, Biba. "Insurance products are complex, and it is important to understand the cover they provide. Brokers are professionally trained to help. Aggregators and technology are developing rapidly and consumers must be sold the right policy."
Debra Williams, managing director at price comparison service confused.com, says the firm backs Biba's views and has voluntarily asked the FSA to regulate its services.
However, Hayley Parsons, MD at Gocompare.com, says: "In our view, comparison sites represent a huge leap forward in terms of transparency and, as a result, consumers are making more informed decisions than ever before."
"If there is a reason to review the market it is only because millions of consumers are now using the sites every day and it is prudent of the FSA to review its position," adds Parsons. "Customers are switching to comparison sites because they are the most effective way of checking the market, seeing their renewal quote in some kind of context, in a way and at a time that suits them. And they are saving big money."
UK financial policy group the Resolution Foundation last year called on price comparison Web sites to introduce a voluntary code of practice to ensure transparency in their rankings of competitive financial products. Research commissioned by the Foundation shows that 45% of UK adults used a comparison site to help them make a financial decision in the last year.
Following its inquiry, it is thought the FSA could revise its guidance, enhance supervision, or make changes to regulation.