Price comparison sites
This article in FTAdviser caught our eye. What's your view on price comparison sites within financial services? Can they add value in some areas and can they result in poor consumer outcomes in others?
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Price comparison sites really are the bane of financial services as it has just made the most important things become a race to the bottom on price rather than giving consumers the protection and quality that they deserve. As advisers, we want to ensure that our customers are covered should the worst happen. With all the choice and complexity of the polices and the consumers themselves, mistakes can easily be made when making a poor price driven decision. Cheap is rarely better and advice is imperative. Many people will be losing out on potential claims through bad choice- we need to change this as many families could and should have been in a different financial position had they benefitted from good, solid, quality advice.
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Comparison sites are a wolf in sheep’s clothing. They only tell half the story and they build in dangerous ‘assumptions’ to their algorithm. For example, on Buildings and Contents, they assume you’ll occupy the property from 9-5, so if your broke into while at work, they won’t pay out.
For mortgages, they don’t touch on criteria, eligibility or affordability which are major factors, this can leave borrowers disheartened when they don’t qualify for the best deal. It can lead to wasted time and house purchases falling through.
The biggest issue though, is they can wreak havoc on your credit score, each search can leave multiple footprints on your credit file and it can dip your score. I’ve seen people not meet credit scores with lenders and the only issue on the report is pages of comparison site searches.
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Comparison sites do a brilliant job in saving clients money each month/yearly with car, home, animal etc insurance and knowing the best general savings rates. The more it gets the average consumer being effective with their finances the better. Where it can step over the line are chat groups where the general public are giving "advice" to others. More needs to be done to increase financial education to the average consumer so they can make better and bigger financial decisions knowing all the facts first.
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Comparison sites provide a strong entry point for products where price is the main variable and increase market transparency, which pressures providers to be competitive.
However, not enough clarity is given to consumers up front, which sees them miss key details such as exclusions or suitability. People who use these sites generally have a transactional mindset and focus solely on the price. For example, a cheap mortgage deal with high early repayment charges or a restrictive income protection policy may cause problems in the future. There is also an issue for anyone who has complex needs, such as health issues, where in-depth research is required before purchasing a product, but they can end up poorly served and take out a product that won’t help them should an emergency take place.
The FCA has previously raised concerns about whether these sites meet Consumer Duty obligations and offer the right outcome. When it comes to financial decisions, suitability matters more than just price.
However, not enough clarity is given to consumers up front, which sees them miss key details such as exclusions or suitability. People who use these sites generally have a transactional mindset and focus solely on the price. For example, a cheap mortgage deal with high early repayment charges or a restrictive income protection policy may cause problems in the future. There is also an issue for anyone who has complex needs, such as health issues, where in-depth research is required before purchasing a product, but they can end up poorly served and take out a product that won’t help them should an emergency take place.
The FCA has previously raised concerns about whether these sites meet Consumer Duty obligations and offer the right outcome. When it comes to financial decisions, suitability matters more than just price.
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Comparison sites are a dangerous con, trading vital advice for flawed algorithms. They treat protection and mortgage liabilities like buying a toaster, but when a bad policy fails, the cost is financial ruin.
Look at Income Protection. Most platforms default to quotes without RPI indexing because inflation protection raises premiums, dropping them down the rankings. A fixed £2,000 monthly payout today will be decimated by inflation over twenty years, leaving a disabled client unable to survive. Similarly, they push cheap Critical Illness cover with highly restrictive medical definitions.
Mortgages are just as broken. Sites lure people with unachievable "headline rates," ignoring lender criteria, service levels, and complex fees. A computer won't check if a lender accepts complex self-employed income, bad credit or unique properties. Consumers waste weeks applying for top-ranked deals they were never eligible for.
Sites generate clicks; mortgage brokers protect families.
Look at Income Protection. Most platforms default to quotes without RPI indexing because inflation protection raises premiums, dropping them down the rankings. A fixed £2,000 monthly payout today will be decimated by inflation over twenty years, leaving a disabled client unable to survive. Similarly, they push cheap Critical Illness cover with highly restrictive medical definitions.
Mortgages are just as broken. Sites lure people with unachievable "headline rates," ignoring lender criteria, service levels, and complex fees. A computer won't check if a lender accepts complex self-employed income, bad credit or unique properties. Consumers waste weeks applying for top-ranked deals they were never eligible for.
Sites generate clicks; mortgage brokers protect families.
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Comparison sites are fine for car or pet insurance, where price is the whole story. For mortgages they are a trap. A screen shows you a rate, but not whether you qualify, whether the lender's criteria fits, or what a product fee adds to the real cost.
Sort by interest rate alone and you chase deals you were never eligible for. Borrowers waste weeks on headline numbers, then watch the purchase fall through. People mistake a low rate for a decision made, when the real work has not even started.
Sort by interest rate alone and you chase deals you were never eligible for. Borrowers waste weeks on headline numbers, then watch the purchase fall through. People mistake a low rate for a decision made, when the real work has not even started.
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The UK’s deeply entrenched reliance on price comparison websites is creating a severe engagement gap, eroding consumers' ability to truly understand the insurance products they buy. By reducing complex financial safeguards to a race-to-the-bottom commodity based solely on price, these platforms inadvertently discourage buyers from evaluating what a policy actually covers. This lack of engagement is compounded by a natural human bias to underestimate personal risk—such as experiencing a medical emergency abroad or a devastating home flood.
While comparison tools undeniably foster market competition, the inevitable trade-off has been a sharp decline in policy comprehension, a vulnerability currently under scrutiny by the Financial Conduct Authority (FCA). The consequences of this disconnect are already evident in industry data: while motor insurance claims boast a 99% acceptance rate, property insurance claims drop significantly to around 70%, often due to consumers misunderstanding
While comparison tools undeniably foster market competition, the inevitable trade-off has been a sharp decline in policy comprehension, a vulnerability currently under scrutiny by the Financial Conduct Authority (FCA). The consequences of this disconnect are already evident in industry data: while motor insurance claims boast a 99% acceptance rate, property insurance claims drop significantly to around 70%, often due to consumers misunderstanding
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Comparison sites have their place, but it depends entirely on what you are comparing. For something straightforward like car insurance, they do a decent job. The product is relatively simple, the variables are limited and the consumer can make a reasonable decision from a price list.
Mortgages are a different matter entirely. A comparison site can show you a rate but it cannot tell you whether you will actually qualify for it, whether the lender's criteria fits your situation, or whether a slightly higher rate with more flexibility might save you thousands down the line. It is a headline, not advice.
The real danger is that people mistake information for guidance. Seeing a low rate on a screen feels like a decision made, when actually the important work has not even started.
Mortgages are a different matter entirely. A comparison site can show you a rate but it cannot tell you whether you will actually qualify for it, whether the lender's criteria fits your situation, or whether a slightly higher rate with more flexibility might save you thousands down the line. It is a headline, not advice.
The real danger is that people mistake information for guidance. Seeing a low rate on a screen feels like a decision made, when actually the important work has not even started.