Comparison sites the winners and losers.

Thanks to Mr. J Amos, a former insurance executive, for this article.

The new phenomenon in UK car insurance since the emergence of Direct Line twenty years ago, is the success of the insurance comparison site.

As always there will be winners and losers as the sites become more prevalent and motorists shop online for their car insurance.
There are now several very good sites available to find a good price for your car insurance. (although the price quoted can often be misleading).

UK motorists
Prior to the Comparison sites there were two types of motor insurance buyers:
1) Motorists that did not have the time or inclination to find their best price.
2) Ones that spent hour after hour trying to find their absolute best deal.

Of the number 1’s, a large proportion will now spend half an hour using a comparison site to find their best deal, rather than just automatically renewing, they will save, a lot of money, in the first year particularly. Afterwards they are less likely to save as much as they are now insured with a company that wants their type of risk.

The remaining number ones are the people that just cannot be bothered to look around for whatever reason or are unable to access the internet, maybe preferring to deal over the phone with call centres. These are the big losers as the insurance companies will want to maintain their profits and will have to raise more money from this area to compensate for the loss of revenue from the winners in section 1. They will do this by increasing premiums in this area also pushing up the cost of add-on’s like legal protection, service charges, interest charges, driving abroad etc.

Section 2 will also be losers as the amount that they can save by continually shopping around will be less than before as premium savings will be easier to find as everyone has easier access to cheaper prices, less confusion will mean an evening out of premiums.

We will undoubtedly see a bigger price gap between the people using the internet and those using call centres, call centre clients will be even more bullied into buying overpriced add-on’s like legal protection, that they do not really want or need at inflated prices. Some companies really do bully clients in to buying products with scare mongering sales jargon like ‘I will make a note on your file that you refused legal protection cover and if you have an accident you are on your own’.

As more comparison sites come into the market and the existing ones become more powerful, with their large marketing budgets, will they try to dictate to the insurance companies, asking them to promote special offers like ‘cash backs’, which are exclusive to their site.

Smaller insurers may have no choice as they acquire more and more of their business from the comparison sites. On the other hand, without the extensive choice that they offer at the moment, the comparison sites will be of less interest to the public. It depends how many sites enter the market in the next few years and what commission they are prepared to accept from the insurance companies who will try to drive down the payments to the comparison sites, as they become more and more prevelant.

Royal Bank of Scotland will be the biggest loser’s amongst the UK motor insurers. They probably controlled over 20% of the UK motor insurance market a couple of years ago, before the comparison sites grabbed a foot hold, through their enormous web of outlets like Direct Line, Churchill, Privilege, Devitt Insurance and NIG (broker only) and their partnerships with many quality household name companies, particularly Tesco, Virgin, The Pru and Natwest.

They will be extremely annoyed at the emergence of the comparison sites as it goes against their own plan of not relying on cost alone. Their companies are often uncompetitive and in the past they have relied on enormous marketing budgets and confusion caused by people not realising that by contacting the Pru, Direct Line, Churchill, Privilege etc for their best deal, they are in fact trying the same company. Royal Bank of Scotland motor policies are OK but offer nothing that you cannot get elsewhere, so they have no edge there.

Although they steadfastly refuse to show their rates on the comparison sites, other than the site that they own with Tesco, as they would not very often look competitive, they will not take this loss of market share lying down. Their new Comparison site in conjunction with Tesco is the first broadside and others will follow. The Tesco site is crammed with Royal Bank of Scotland companies and it is not going to be as competitive as Moneysupermarket.com etc.

So although Royal Bank Scotland companies do not appear on the other sites, their renewal clients will have their Royal Bank of Scotland renewal premium in their hands as they look at alternatives on the comparison sites, and price wise they will not often look very competitive.

I can see a drop in the Royal Bank Scotland market share over the next few years as they try to combat this new phenomenon, which is going to grow and grow and as the market leaders it cannot be a good thing for them as they will need to be more competitive and join the Comparison sites or stay outside and lose market share, neither of which will please them.

The other big loser over the next few years will be Yellow Pages, who have made fortunes from insurance companies and brokers. The comparison sites mean that the insurance companies and brokers will not need Yellow Pages as much and will be switching their budgets to the internet and you can see a day when the Yellow Pages insurance section will have dramatically shrunk.

Comments:
My advice is to keep your eye on developments and spend a couple of hours a year searching the website to find your best deals.