Insurance comparison sites

Looking for a new health, car, or home insurance policy? CHOICE's review of comparison websites reveals some hidden catches.
 
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01 .Compare the comparison sites

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If you want to do your own research when you need to insure your car or your house insurance is up for renewal, where do you look for information? Many people start with one of the free online insurance comparison websites available for a quote, but can you be sure of unbiased results?

We take a close look at four of Australia’s largest online insurance comparison sites to see how they work - and just how much of the market they are actually letting you compare. All offer health and life insurance, and three also offer car insurance.


Video: Choice anti-ads: insurance comparison sites


In our review of these comparison sites we find:

  • free comparison sites can earn exorbitant fees per sale that constitute a large part of your insurance premiums.
  • some comparison sites are misleading as to how little of the market they're actually comparing.
  • other sites are actually owned by the insurance companies they are supposedly comparing.


Show us the money

When you buy insurance through an online comparison site, a fee may be paid by the provider to the site, either as a fixed percentage of the premium or a fixed payment per sale. The site may also receive trailing commissions, for a period ranging from 12 months up to the whole time you maintain that policy with the provider.

All the sites we looked at divulge how they are paid but none reveal how much. Health funds Bupa and Medibank Private have both called for more transparency in the fees earned by insurance comparison websites. 

“Say you're signing up for a $2000 policy - you don't know that you've just committed $800 for that policy as a charge to the company that put that product on that site,'' says Medibank’s managing director, George Savvides.

While all of the online comparison sites we spoke with denied commissions play any part in their product recommendations, the potential for a conflict of interest is evident - 89% of revenue to iSelect’s health business unit in the financial year 2012 came from just five of their health insurance brands.

“Private health insurers pay aggregators commissions when they convert searches into a sale, creating an incentive to encourage sales of policies that will generate higher revenue," Medibank’s Victoria Hanlon told CHOICE.

Medibank also says the commissions paid to online comparison sites are finding their way back into increased premiums and quotes. Commissions paid to aggregators are funded from the insurers’ advertising budgets, which reportedly rose $90m between 2007 and 2012.

The little guys

The two health fund giants, Bupa and Medibank, have a combined 60% of the health insurance pie. Online comparison sites can give smaller funds a foot in the door - iSelect sold 20% of health insurance premiums in 2012. 

iSelect’s Matthew Cuming says iSelect gives a voice to smaller health funds by bearing the cost of marketing, while NIB’s Mark Fitzgibbon sings a different tune to the other big insurance players: “Anything that shakes up competition and benefits consumers is good.”




 
 

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In the past, ASIC has identified that some online finance comparison sites aren’t clearly disclosing that they only compare a limited number of brands and, in turn, quotes. With the exception of Canstar, all the sites we reviewed compare policies and provide quotes from a third - or less than a third - of all health insurance providers and even fewer for car insurance. 


In 2007 the ACCC accused iSelect of engaging in misleading conduct by misrepresenting in ads and on its website that it provided comparisons of all health insurance cover available. iSelect subsequently provided a court-enforceable undertaking for a period of three years that it wouldn’t make representations that it compares all insurance policies, unless it was actually the case. Matthew Cuming told CHOICE the company learned from the experience and took it as an opportunity to improve and implement regular reviews of website content.

However, in 2011 Bupa sought a federal court order to stop iSelect making claims in its TV ads that it would pay $499 to anyone who was forced to serve a waiting period when switching to a new health insurance policy. The basis of Bupa’s complaint was that it was misleading, because under Australian law no one has to re-serve waiting periods when they change to an equivalent or lower level of hospital cover. But iSelect launched a cross-claim against Bupa, contending that the law does not apply to extras cover.

Both claims were dismissed by consent, and in a court-ordered mediation iSelect again gave a three-year undertaking - this time to, among other things, refrain from stating that it compares “most” or a “wide” range of health insurance products and funds unless this is the case.

Who owns who?

When ASIC took a close look at online insurance comparison websites, they found insufficient disclosure of the relationships between website operators and the issuer of the brands being compared on some. Indeed, there’s significant potential for conflict of interest in the ownership structure of some of the free comparison sites and their quotes.


Choosi.com.au, the second-most used site after iSelect, is owned by Hollard Financial Services, a major provider of life insurance and the distributor of seven of the insurance brands available on the site.

New entrant Compare the Market is owned by Budget Holdings Limited (BHL). BHL in turn, owns insurance giant Auto and General, encompassing local brand names such as the car insurer Budget Direct.

When we carried out a shadow shop for car insurance on the online comparison websites, we found that five out of the six top results on comparethemarket.com.au were Auto and General Insurance policies and quotes. However, this may be more an indication of their position in the market, as the top-ranked results for the same scenario on two other sites, iSelect and Canstar, were all underwritten by Auto and General.


What does CHOICE do?

CHOICE is completely independent and not owned or affiliated with any of the insurers we review in our comprehensive analyses of policies. We're a not-for-profit organisation funded by our members, and don't receive commissions or fees for advertising.

When we compare insurance, we do it based on value and look at the broadest possible range of products available. For our recent health insurance review we compared 20 open membership and five restricted membership health funds, while for car insurance we reviewed 39 insurers.
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The biggest Australian insurance comparison site, iselect.com.au, is best known for its health insurance comparisons. It also sells car and life insurance while its subsidiary site InfoChoice is used for comparing credit cards and savings accounts.

We have assessed sites using ASIC’s guidelines for financial comparison sites and principles developed by consumer groups (including CHOICE) for electricity comparison websites, as follows:

  • Accuracy Do they clearly disclose the basis of awards or ratings? Do they include all providers or a warning if not all providers are compared?
  • Impartiality What kind of relationship do they have to the product providers on their site?
  • Transparency Do they disclose links to providers including commissions, referral fees, payments for inclusion in comparisons and payments for featured products?

Accuracy

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  • Insurers are listed on the product comparison page and you’re required to tick a disclaimer saying you understand that iSelect recommends “Approved” policies from participating insurers.
  • We couldn’t locate a disclaimer indicating that all health insurers aren’t compared, although there’s a note deep in the fine print that not all car insurers are compared.
  • Twelve out of 36 providers are compared for health insurance, three of which are restricted membership funds. Twelve car insurance providers are compared.
  • iSelect consistently assures us that recommendations are based on consumers’ needs but we were unable to find any more detail on the basis for recommendation of products.

Impartiality

  • iSelect was listed on the stock exchange in June this year. The largest shareholders before the listing were ninemsn and founder Damien Waller.
  • Three of the 12 car insurance brand names listed on the site are owned by iSelect; they also have their own brand of health insurance, Surepath (not currently available on the site).
  • Ten of the 12 car insurance brands are underwritten by the same insurer, Auto and General Insurance Company.

Transparency

  • A “How does iSelect make money?” statement on the site declares iSelect may receive a one-time or recurring fee from providers.

iSelect say:

  • The website and call centre operators are detached from fee arrangements so commissions do not influence recommendations.
  • Upfront commissions never exceed half of the first year’s premium for health, and trailing commissions don’t exceed 6.5% of the premium collected over the life of the product.

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A new entrant to the Australian market, comparethemarket.com.au is known for its “Compare the meerkat” TV campaign, which made it the number one site for car insurance in the UK. It compares health, car, life, and travel insurance.

We have assessed sites using ASIC’s guidelines for financial comparison sites and principles developed by consumer groups (including CHOICE) for electricity comparison websites, as follows:

  • Accuracy Do they clearly disclose the basis of awards or ratings? Do they include all providers or a warning if not all providers are compared?
  • Impartiality What kind of relationship do they have to the product providers on their site?
  • Transparency Do they disclose links to providers including commissions, referral fees, payments for inclusion in comparisons and payments for featured products?
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Accuracy

  • Insurance providers are listed under “Who we compare”; there are nine out of a possible 36 health insurance funds listed and nine car insurers.
  • It is noted several times on the site that they don’t compare every product in the market
  • We’re informed that the top results for car insurance are based on price but no other basis for recommendations is disclosed.

Impartiality

  • Compare the Market is owned by Budget Holdings Limited who also own insurance underwriting giants Auto and General, including brand names such as Budget Direct.
  • Six of the nine car insurance providers are underwritten by sister organisation Auto and General Insurance.
  • Two of the 21 travel insurance brands compared, Budget Direct and 1st For Women, are owned by Auto and General Services (AGS).

Transparency

  • The fine print on Compare the Market’s website discloses that a fee is earned for each policy purchased as a result of the use of the site.
  • It also notes that AGS earns a fee if you purchase the Auto and General insurance brands.

Compare the market say:

Comparethemarket declined to comment for this story.
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The second-most frequented site after iSelect, choosi.com.au offers comparisons for health, life, funeral and pet insurance.

We have assessed sites using ASIC’s guidelines for financial comparison sites and principles developed by consumer groups (including CHOICE) for electricity comparison websites, as follows:

  • Accuracy Do they clearly disclose the basis of awards or ratings? Do they include all providers, or a warning if not all providers are compared?
  • Impartiality What kind of relationship do they have to the product providers on their site?
  • Transparency Do they disclose links to providers including commissions, referral fees, payments for inclusion in comparisons and payments for featured products?

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Accuracy

  • A list of providers for each product is accessible from the homepage.
  • Choosi compare seven out of a possible 36 health insurance products.
  • The fine print on the bottom of the homepage states that Choosi does not provide information or offer cover for all products available on the market.
  • There is a customer rating section on the site, but it’s not clear if this customer rating influences the recommended products - and the top products as rated by customers for life, income and funeral insurance are predominantly Hollard Financial Services brands.

Impartiality

  • Choosi is owned by Hollard Financial Services which is the distributor of seven of the funeral, pet, life, and income protection insurance brands available on the site.
  • You can only obtain quotes and purchase a policy through Choosi for brands listed as “Products Available Through Us” which, with the exception of health insurance, are all Hollard brands.

Transparency

  • The fine print on the bottom of the homepage declares Choosi’s links to Hollard Financial Services.
  • Choosi’s “About Us” page advises that Choosi is paid a commission for products bought through Choosi.
  • They also note “Choosi isn’t an insurer” (it’s just owned by an insurer).

Choosi say:

  • Choosi does not purport to compare the entire market and makes the range of insurance brands available very clear to consumers.
  • Choosi is continually exploring opportunities to provide additional insurance brands.
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Canstar.com.au provides a comparison of most personal insurance products using its star ratings system for recommendations.

We have assessed sites using ASIC’s guidelines for financial comparison sites and principles developed by consumer groups (including CHOICE) for electricity comparison websites, as follows:

  • Accuracy Do they clearly disclose the basis of awards or ratings? Do they include all providers or a warning if not all providers are compared?
  • Impartiality What kind of relationship do they have to the product providers on their site?
  • Transparency Do they disclose links to providers including commissions, referral fees, payments for inclusion in comparisons and payments for featured products?

Accuracy

  • Canstar includes the broadest range of insurers out of the comparison sites reviewed, with 20 out of the 24 open health insurance funds and 42 car insurance brands.
  • The methodology for their star rating systems is clearly disclosed on their site.

Impartiality

  • Canstar is privately owned by shareholders with no links to insurers.

Transparency

  • Insurers that have received a five star rating from Canstar can pay to use the Canstar name and award in their marketing. 
  • Canstar also receives fees for advertising on its site and for referrals to some provider sites.

Canstar say:

  • Canstar list for comparison as much of the market as it is practically possible to do, irrespective of whether we receive fees for that product or not.
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