Price comparison websites have long been an attractive option for savvy consumers looking to get the best possible price for their utilities and insurance policies. Whether it’s car and home insurance or gas or electric suppliers, comparison websites have made it infinitely easier and faster for homeowners to shop around online.
However, a new ruling by the UK’s Financial Conduct Authority (FCA) could put a spanner in the works of comparison websites, particularly those listing insurance products. The FCA has proposed new ways for insurers to price-up their products. The biggest alteration that the FCA is mooting is to prohibit a concept known as ‘price walking’.
Insurers would no longer be allowed to raise their premiums for existing customers, which have long resulted in long-serving, loyal customers paying considerably more for the same products than new customers. The plan to level up the pricing of products marketed to new and existing customers is likely to change retention levels by quite some distance. There is a feeling that fewer consumers will switch if they have greater confidence that their existing suppliers cannot undercut them.
However, there are signs that comparison portals are proving just as, if not more, popular for other sectors. Some comparison platforms allow for the continued monitoring of products that alert users when better-value deals become available, notably Compare the Market’s AutoSergei function and the WeFlip platform that’s revolutionising the energy sector. Meanwhile, other crowded markets like online sports betting still lean heavily on comparing the best available odds for upcoming football matches and other sports, where bookmakers have carte blanche to set their own prices without fear of regulation.
For the insurance market, it’s likely that insurers will bump up the value of new policies if the FCA’s proposals are implemented. Therefore, at least in the short-term, price comparison websites will still be needed. However, as time elapses and the gap between premiums for renewals and new customers narrows.
Some people still don’t quite understand how comparison websites work. Contrary to popular belief, they are not duty-bound to trawl the entire marketplace for the best deals. These sites are merely a platform to showcase providers they have existing commercial relationships with, receiving commission for every lead they generate. According to the Financial Times, most leading insurers will pay up to £50 for every new customer a comparison site generates. Despite the broad coverage of service providers by comparison websites, the onus remains firmly on the consumer to shop around to get the absolute best deal available, if that is their prerogative.
Nevertheless, there will always be an appetite among consumers to compare financial products. This will be particularly prevalent following large events like buying a new home or vehicle when an individual’s circumstances may change and certain providers may favour consumers of a certain profile or demographic.