We have written quite a bit on the car insurance blog on comparison websites or car insurance aggregators. There has been in recent years a sharp rise in car insurance aggregators and comparison websites. The owners of these websites have found a niche gap in the market – and are using this to attract customers and earn commissions from the sale of cheaper car insurance policies!
What is this niche and why are they successful?
I believe there are a few factors to consider in the analysis of the success of aggregators / comparison websites:
- A multitude of car insurers and car insurance products
- Growing competition in the financial services industry
- The fear of “missing out” on potential business leads
- The growth and acceptance of financial transactions performed online
- The need of the consumer for speed and the ease of use of these systems
The comparison websites / aggregators have thrived as more car insurers experienced a fear of “missing out” and joined the pool of car insurers to be compared.
Direct insurers are fighting back
It now appears that they are fighting back and trying to convince more clients rather to go to them directly. This is done mainly by offering reduced premiums to those clients who are contacting them directly instead of going the route of the aggregator.
It is expected that the AA’s British Insurance Premium index will show a sharp rise in the average quoted premiums for policies via comparison sites in the first three months of this year. The index, published this week, will show an overall fall in the price of car insurance of 3.2% for comprehensive policies. However, the average price for deals on comparison sites rose by 4.6%.
The average for third party, fire and theft deals, often taken out by younger people, fell by 4.5% for direct deals but rose 9.2% on comparison sites.
Ali Hussain provided some interesting findings in a story on Times Online titled “Comparison Sites could cost more”. This is an analysis of the trend amongst car insurers to invite more customers to approach the directly:
- Axa, which launched its direct motor policies in February, offers a £30 discount if you apply direct rather than through a comparison site. It said: “We have to pay comparison sites commission, and this is to cover that cost. We want to encourage customers to come to us direct.”
- Swinton and Kwik-Fit also offer cheaper deals in some cases if you go direct rather than via a comparison site.
- The AA said it offered some deals cheaper to direct customers, while HSBC offers different prices depending on how a customer applies.
It is believed that customers who come via comparison sites are less likely to be loyal so there is little incentive to offer reduced rates. Comparison site deals may include less cover than policies obtained direct from insurers, resulting in the difference in averages. In some cases, comparison site deals will have higher excesses.
Much will however depend on the contractual agreement between the aggregator and the car insurers that takes part in the comparison system. Some insurers such as Zurich say that they are obliged to offer the same rates direct and through comparison sites because of contractual agreements with the sites.
Several car insurers in the UK had to review their participation in the comparison/ aggregator business model, and a few have since withdrawn.
- Aviva, which has about 15% of market share, has only sold policies direct since September 2008.
- Direct Line, part of the Royal Bank of Scotland group, also does not offer deals through comparison sites.
The major aggregators do however not believe that it is less expensive to go direct. Steve Sweeney at moneysupermarket.com, the comparison site, denied that providers offered better deals direct. “Our analysis shows we are saving customers more and that there is no difference between prices on comparison sites and insurers,” Sweeney said.
It is fascinating to view these trends in the UK and to reflect on what is to be expected in South Africa. South Africa has far fewer vehicles – but a massive market of uninsured vehicles – with only about 30% of the 9.6million vehicles on our roads insured!
There is much competition in the car insurance industry and the last 2 years have seen the rise in market share of a several aggregators. We can expect direct insurers and aggregators/ comparison sites to be innovative and to continue challenging the pricing of the various insurance offerings provided.
This is good news for the diligent consumer, who – with a bit of effort – should be able to find a competitively priced offering to match his specific needs!!