Q: How can I convince my clients that buying insurance on the cheap through an online aggregator can be a false economy?
A: I have to be honest – this has become a real bug bear of mine over the last few years and as such I welcome the renewed interest the FCA is paying to these sites. More transparency is certainly required to ensure that anyone purchasing cover via an aggregator site achieves a like for like comparison on all aspects of the cover provided rather than simply the price.
Clever marketing and attractive advertising has resulted in Joe Public thinking that they are expert enough to buy home and protection products online. However, in reality they simply do not have the knowledge and are not always given the right information required to make an informed choice.
It is all too easy to simply log on to an aggregator site, type in minimum details and select the cheapest product without really looking at it closely enough. They may feel really happy with themselves for getting cheap cover; even telling their friends how cheap their cover was; and that sense of false security can last for several years, until it comes time to claim, when they realise that they may not have the wide range of cover they thought they had.
Buying cheaply is not the same as buying wisely. The cheapest products are often the ones that have stripped out the most cover or have the highest levels of excess; leaving claimants in a terrible situation should the worst happen.
This is something recently backed up in a statement by the British Insurance Brokers Association which believes that quotes returned often do not reflect the customer’s requested cover and instead introduce a high excess in order to generate the lowest possible premium to win the business. Is this really protecting the customer’s needs? I think not!
I am willing to admit I have used aggregator sites, but only on products I understand (and my business does not sell!) and can make an informed choice about. I recently needed to purchase travel insurance for a long haul trip and having entered my details I was met with some unbelievably cheap rates.
Now a potential client may have simply pressed the button on the cheapest one, purchased, and then in the event of a medical emergency found that the cover was not comprehensive enough.
With my insurance background I was able; after reviewing several; to select a mid-priced product that provided adequate medical expenses cover, cancellation and baggage cover.
Buying home insurance can certainly be a real minefield online. One size does not fit all when it comes to the needs of home owners. However aggregators tend to make assumptions and use the most common denominator, but this does not work where some things you may expect as standard have been stripped out of the cover, for instance does the policy have “trace and access” to find and fix leaks under the floor, or have a high escape of water excess applied. Also if you are purchasing a new property does the cover protect you from the date of exchange of contracts?
I think that when you explain this to your clients they will soon see that buying cheap is a false economy. How can anyone make an informed decision without actually speaking to someone who knows the product? As their adviser you understand their individual needs and will be able to deliver the best possible cover for the best price.
