According to the Life Insurance Aggregator Review 2017, product comparison websites (PCWs) provide no information on how consumers will be helped if they need to lodge claims.
“This is a clear disadvantage compared to advisers, who are expected to help their clients through the full cycle of the life insurance policy,” the study said.
Rice Warner looked at the remuneration structure of PCWs and found that most receive a similar commission level to financial advisers.
“Consequently, we would expect them to offer a level of services which closely matches those provided by a financial adviser,” the research said.
“This research, however, indicates that this is unlikely to be the case.”
Rice Warner also examined the tools assisting consumers in calculating their insurance needs and found PCWs show wide variations in their recommendations for consumers.
By comparison, it said advisers would be more likely “to set a level of cover which better meets the needs of the individual” and provide “a tailored recommendation for insurance needs”.
The study also found that while several PCWs compare product features, the focus for product differentiation is predominantly price.
“The inadequate link between price and product features is likely to result in consumers overlooking what is being offered for the price they pay,” Rice Warner said.
“Without comparing the product features, which can be difficult and time consuming, consumers may rely on product names and prices to differentiate products.”
While I support the attack on the failures of Insurance comparison websites, it’s a bit rich coming from a provider of one of the comparison tools that are used by financial planners to prove their ‘best interest duties’ are met. As best I can tell, the use of these tools suffers the same problems – point in time assessment and encouraging the cheapest product and highest featured product regardless of whether it’s in the consumers best interest in the long run.