Comparison websites - yay or nay?

Comparison websites - yay or nay?

In Australia we are definitely spoilt for choice when it comes to most things, and insurance is no exception. For a customer looking to make an informed decision however, this freedom of choice can be a double-edged sword. Finding the company and the coverage that best suits your personal circumstances can feel like searching for a needle in a haystack.

One way for consumers to compare products and receive summarised information about the different products provided by competing insurers is through comparison websites (also known as ‘aggregators’).

The purchase of General Insurance requires due consideration by consumers. The scope of cover, product options and claims service capability vary greatly across the industry and using a comparison website can fail to take these factors into account and carry some hidden catches.

In general, comparison websites provide only a very simplistic and often inaccurate overview of different insurance policies and tend to reduce the complex insurance purchasing decision to one based on price alone - disregarding differences in policy cover, product options and claims service capabilities.

When thinking about a comparison website make sure you take into account these important factors:

How the website generates its income

Insurance comparison websites are generally free to use for the customer but they are for-profit organisations and so must generate income from somewhere. Set amount or percentage based commissions from insurers on products sold are a common way for comparison websites to generate income. Advertising as well as more sophisticated income strategies such as trailing commissions (where they may receive various payments over the life of the policy) are also often used as income streams. Most sites will provide some kind of information on how they are paid, but rarely will they divulge the amounts they receive.

The breadth of the comparison you are actually getting

Seek out information on the website regarding the amount of the market the site is actually comparing – it might be as little as a third of the total possibilities! In the past ASIC has taken action against comparison websites for not disclosing how much of the market they do actually compare.

What relationships exist between the comparison site and the provider of the services they are comparing

It is important to check the background information on the site you are using – research recently undertaken by Choice revealed that one website owned three of the twelve companies being compared. In another instance ten out of twelve options were underwritten by the same insurer. Be sure you are aware of the relationships between the options being presented and the site itself and take this information into account when deciding what solution is best for you.

How transparent the website is in disclosing the detail of their operations

Read the fine print on the website’s terms and conditions to ensure you are clear on how the website operates. If you have read the terms and conditions and still have questions about that particular site, consider your options before continuing.

ASIC has issued advice that encouraged consumers to use caution when considering using a comparison website to purchase insurance (or any other product!).

What is the alternative?

If you decide that you would like more personalised, expert advice, a qualified insurance adviser can offer you the real-life experience, expertise and peace of mind a comparison website cannot. An insurance adviser can also give you advice specific to your situation, which can be particularly valuable if you require a non-standard solution. An adviser is also likely to have personal relationships with a range of insurers and will be able negotiate competitive premiums on your behalf.

To get the best of both worlds, use comparison websites to assist in your information gathering phase and speak with your insurance adviser to refine your solutions. For even more information on choosing and purchasing insurance in Australia, visit the Australian Securities and Investments Commission’s financial guidance site, MoneySmart.

To find a trusted insurance adviser visit