Consumer

Missing Pieces

^{Graeme Samuel | APRIL 2008}

If you’re using the web to compare insurance, superannuation or mobile phone deals, tread carefully. Comparison sites are there to make money and chances are you’re not getting the full story.

Trying to find the best deal when comparing insurance, superannuation or mobile phone plans can be an incredibly difficult and frustrating exercise.

Many such products have become so complicated that comparing them has become next to impossible, which can result in people staying with a company for years even though they may not be getting the best deal. For many of us, staying with a current service provider can seem a more attractive option than going through the entire process of trying to find a better deal.

But in recent years, thanks in part to the internet, a host of services offering to take some of the leg work out of such chores have appeared. These sites consolidate competing products in the one web site allowing for quick and easy comparison of many products.

Sites now exist for comparing everything from cheap travel to superannuation schemes, potentially simplifying the process of shopping around. Simply type in your details and the product or service you are looking for and the site returns its recommendations.

With such convenience and time-saving on offer, it’s little wonder these sites are becoming increasingly popular – Britain’s moneysupermarket.com, confused.com and uswitch.com collectively draw around 15 million users every month.

But a recent case in Australia and concerns from overseas demonstrate good reasons for caution in treating such third-party sites as a panacea to product-comparison headaches.

In November last year the Australian Competition and Consumer Commission accepted undertakings from iSelect Health over concerns about some of the claims being made on its website.

The site and its call centre compares insurance policies and can arrange for consumers to purchase the policy it recommends, with the insurance company then paying a commission to iSelect.

The ACCC was concerned the site was misrepresenting to its visitors that it covered a significant portion of all available health insurance policies, and that it was able to find the best suited policy at the lowest price.

But iSelect was at times only comparing policies from around a third of the available providers, with some of the largest private health insurance providers not included in its online database.

The company agreed to amend its advertising, but the case highlights the potential pitfalls of relying on a single source when comparing products.

Comparison sites usually exist to make money. This means they are not provided as a community service and therefore most receive payment from the companies they represent. Companies that do not agree to pay commissions to a site can be left off the list, and in some cases some of the biggest insurers have chosen not to be part of these services. That means potentially in some cases cheaper or more suitable products may be excluded from a search. The information on such sites may also be historical and as such may not reflect all current promotions or special prices in the marketplace.

Concerns about the independence of similar commercial arrangements have dogged the financial advisory sector for years and the Australian Securities and Investments Commission has raised concerns about potential conflicts of interest in some financial comparison services.

ASIC has also warned of potential problems involving on-line calculators used to compare services such as home loans. Some calculators have been found to make general assumptions that ignore important considerations, potentially providing misleading recommendations that may not offer the best results for those using them.

In January this year the United Kingdom’s Financial Services Authority issued a warning to consumers that sites comparing insurance products were potentially misleading.

While booming in popularity (69 per cent of UK car insurance buyers reportedly use comparison sites) the regulator there has warned that many sites do not make clear the financial arrangements between them and insurers. Authorities fear some shoppers are being misled into thinking the services cover an entire market where that may not be the case. Some sites have also been accused of failing to adequately protect the personal data of users.

As a result, some of the major UK insurance providers have opted not to offer their products through such sites and have warned their customers to be wary.

There is no doubt that comparison sites are convenient and offer potentially significant time savings, but they should be used as a starting point, rather than a one-stop shop.

In order to ensure you really are getting the most appropriate policy or deal, check the wording carefully for any exclusions or terms and conditions and remember there may be better deals not included in the comparison.

Ring around the major companies not represented on the site and seek a few alternative quotes. A good rule of thumb is generally to seek at least three quotes independently of each other.

While the majority of comparison sites are commercial operations, there are some government services designed to assist the public in making better decisions when buying insurance or other services.

A good starting point is the Private Health Insurance Ombudsman’s website which has a searchable database of all private health insurance policies offered in Australia.

Graeme Samuel is chairman of the Australian Competition and Consumer Commission.