1 June 2018
Insurance price comparison websites: Are they an effective tool?
Insurance price comparison websites (insurance PCWs) are well established in Canada. We have in fact identified about a dozen such sites. The millions of Canadians who visit them every year generally appear to be pleased with them. This is what we found based on the interviews we conducted with some 150 consumers. They like being able to compare several insurance products and to make choices easily; they appreciate the simplicity and speed of the process, and are confident that they can find insurance at a low price.
But they need to be careful! The experts we interviewed and the foreign studies we consulted expressed serious reservations not only about the use of insurance PCWs in the insurance field, but also about their benefits for consumers. What we discovered upon analyzing five Canadian sites has led us to share these misgivings.
The information about the insurance products presented on insurance PCWs is often incomplete. The insurance PCWs’ business relationships and modes of remuneration are rarely mentioned, whereas there is a strong possibility that these factors influence the way that results are presented or incite insurance PCWs to favour a quick sell. The amount of information collected, which is possibly passed on to third parties, is worrisome and may exceed what is necessary to calculate the insurable risk. In addition, insurance PCWs often limit their responsibility.
All this is scarcely surprising, because insurance PCWs are not required to register as a firm (even though, in Québec, they soon will be) and are therefore not subject to the same regulatory framework.
In short, even though these sites may be appreciated for some of their features, it is possible that the insurance products they offer to consumers will not be adapted to their needs. These findings have brought us to make several recommendations based on our study of the regulatory framework in Québec and other jurisdictions.
Option consommateurs therefore recommends that provincial legislators amend their respective statutes to require insurance PCWs to be registered as a firm. Exclusions from this obligation should be listed explicitly and should not be subject solely to the remuneration terms of insurance PCWs, as is the case in European Community law. Option consommateurs also recommends that provincial legislators explore the possibility of eliminating the spontaneous declaration requirement for the insured, which is a significant burden for consumers, especially when they do not benefit from the guidance of a certified representative. Finally, we encourage legislators to continue to promote insurance awareness and education activities for consumers.
Option consommateurs also has several recommendations for the insurance PCWs themselves. One of these is that they be required to disclose their business relationships and clearly present the characteristics of the insurance products being compared.
Our final recommendations are for the consumers. When using such sites, they need to be vigilant and, if they decide to purchase an insurance product, we strongly recommend that they contact a certified representative. In this way, they will be able to ensure that they have a product that meets their needs. Failure to take such precautions could have significant consequences for them.
In our opinion, these changes are necessary in order to guarantee that Canadian consumers who shop for insurance products online are protected.