In a review of the sector the Financial Conduct Authority (FCA) found customers were not always given clear information which increased the risk of users selecting the cheapest product without understanding the level of cover it offered.
While a few websites did provide this information clearly the level of clarity varied significantly from provider to provider.
Clive Adamson, FCA director of supervision, said: “Price comparison websites have increased in popularity among consumers with an estimated one third of buying their motor insurance policy through them.
“However, our review found that they were not meeting our requirements in delivering fair and consistent outcomes for consumers. We also found, through our consumer research, that consumers had a number of misconceptions about the services they provided.”
Customers mistakenly believed that the website had provided them with a quote based on their individual needs after assessing their suitability for the policy.
In some cases comparison websites were not providing information about which companies they were affiliated which contravened FCA rules on disclosing conflicts of interest.
Firms involved in the review will be provided with individual feedback asking them to take action on specific areas where they are failing to meet the regulator’s expectations. The FCA will supervise the remedial action to make sure the specific areas have been addressed.
Adamson said: “We expect price comparison websites to take on board the findings of the review. It is also important for consumers to understand that not all products are the same and the cheapest product may not always be the best for their needs.”
James Daley, managing director of consumer group Fairer Finance, said: “Insurers regularly remove elements of cover or add on extra charges and fees so that they can offer the most competitive headline price – but most customers remain oblivious to the differences between policies.
“While the FCA acknowledges these serious problems, it has stopped short of recommending any solutions.”
Daley wants to see customers face a greater number of questions up front, so that they can be sure that they are comparing policies which meet their needs.
“The FCA’s loose calls for greater transparency simply don’t go far enough towards addressing this issue,” he added.
