With Google often the first port of call for consumers researching and comparing products, Australia’s consumer watchdogs are paying close attention to developments in the comparison website sector.
Comparison websites, especially insurance sites, have attracted scrutiny, with consumer groups acknowledging their usefulness in giving customers more information and potentially getting cheaper deals but flagging concerns about lack of transparency in the sector.
The Australian Competition & Consumer Commission has recently noted that while comparator websites could drive competition and deliver savings, it expressed concern about “a few bad apples”. It is developing new guidelines for the industry, although it notes that the Australian Securities & Investments Commission has specific focus on financial product comparisons.
The new best practice guidelines that were expected to be released “early” this year will now not be released until midyear, an ACCC spokeswoman said.
Consumer advocacy group Choice told The Australian that comparison sites could be useful when seeking out a better deal but added that not all sites are the same.
“When we looked at ‘free’ insurance comparison sites we found they can earn exorbitant fees per sale from the insurers. These fees can make up a sizeable chunk of your total insurance premium,” a spokesman said.
Fred Schebesta, co-founder of one of the biggest comparison websites, Finder.com.au, also pointed the finger at suppliers for failing to provide sufficient information to compare products and services.
Schebesta said that there was growing demand for comparison sites and they “provide a great service, if more Australians used them they would be financially better off.”
And while the ownership and financial interests of the sites should always be displayed prominently, he is particularly focused on greater transparency by some of the companies such sites compare.
Aggregators such as comparison websites are having difficulty getting access to some product information, Schebesta said.
“(It’s time) ASIC and ACCC got on the front foot” and forced insurance companies “to reduce their prices by opening up the information for consumers, and therefore comparison sites.” He applauded the transparency of other industries like banking and travel service providers for being much more transparent.
He said the more information provided by suppliers, the better the deal for consumers.
“Over six years of doing this we have been able to make products better by doing this, comparisons make prices lower.”
Tom Godfrey, spokesman for Choice, also noted consumers should examine who owns the site and that “some comparison sites are misleading about how much of the market they compare.It’s also important to remember some sites are actually owned by the insurance companies they’re supposedly comparing.Read the fine print.”
Godfrey’s comments come as ASIC prepares to launch its own comparison site for the high cost North Queensland home insurance market after being asked to do so by the federal government last year.
An ASIC spokeswoman said the commission had been working with the Insurance Council of Australia on the site, due to be launched next week.
In its comparator report released in November last year, the ACCC defines “comparator” sites as those that compare goods and/or services offered by a range of suppliers, including energy, telecommunications, travel, banking and insurance.
Usually free for consumers, these websites follow a variety of business models, including: fee per lead, in which they earn revenue from the service provider for each “click-through”, or commissions for sales; or a combination of both, or in some cases they charge for advertising on their sites.
“For example, in the private health insurance sector, commission payments are generally between 20 to 40 per cent of the first year’s premium, with a trailing fee also payable in some cases,” the report says, “with the majority of comparator website operators reviewed by the ACCC focusing on generating revenue via click-through or commission per sale.”
The ACCC’s report said its concerns revolved around transparency and whether some sites were:
● clearly disclosing the basis of awards or ratings;
● disclosing any links to the providers of products that are being compared, including commissions, referral fees, payments for inclusion in comparisons and/or payments for ‘featured’ products;
● including a warning if not all providers are included in the comparison;
● clearly disclosing advertisements to prevent consumers being misled about the ranking of the product;
● where necessary, including a warning that financial products compared do not compare all features that may be relevant to the consumer.
Comparator websites were a “priority area” for the ACCC’s compliance and policy team, it added.