Price comparison websites are increasing the risk of consumers buying inappropriate insurance cover by not providing vital information on policy terms, the UK's financial regulator has warned.
On Wednesday, the Financial Conduct Authority said it was "concerned that consumers' focus on headline price and brand when using price comparison sites could distract from crucial product features such as policy coverage and terms."
"By failing to provide clear information, the websites are increasing the risk that consumers may buy products without understanding key features," it said in a thematic review of the sector.
The regulator said that while a few websites did provide this information, the level of clarity "varied significantly".
It noted that many consumers did not understand voluntary excesses, the importance of pre-existing medical conditions in travel insurance policies, and were not always adequately informed about additional charges or use of their personal data.
Price comparison websites account for about a third of motor insurance policy sales. Some are independent, such as Moneysupermarket.com and GoCompare, while others are owned by insurance companies, such as Confused.com, which is owned by motor insurer Admiral. Some insurance providers, notably Direct Line, do not sell policies via price comparison sites.
The FCA said that not all sites owned by a larger group or an insurer disclosed this potential conflict of interest, although it found no evidence that these companies used this relationship to commercial advantage.
It also found that sites did not always disclose clearly that they are remunerated primarily from commissions on policy sales made through the site.
"We expect price comparison websites to take on board the findings of the review," said Clive Adamson, FCA director of supervision. The FCA is not taking enforcement action against any of the websites.
"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."
The review is one of several ongoing studies into the way insurance products are marketed and sold. The Competition and Markets Authority is conducting a deep investigation into the private motor insurance market, including sweetheart deals between insurers and price comparison sites and the cost of courtesy cars provided to accident victims. The FCA is also investigating the sale of "add-on" products such as motor legal protection.
In September 2013, Martin Wheatley, the chief executive of the FCA, told parliament he was "very wary of the comparison sites, because they are all gamed . . . so there is clearly a combination of greater disclosure and some behavioural change needed in the market".
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