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Price comparison websites probed

The Financial Conduct Authority (FCA) has launched a probe into price comparison websites (PCWs) to find out if they are misleading customers by promoting the deals they want them to buy.

The City watchdog said it was looking into potential conflicts of interest where PCWs are paid by companies to feature their products or even owned by insurers themselves.

It will also investigate whether a focus on price leads consumers towards sketchy plans which fail them when they come to claim.

Spokesman David Cross said: "If insurers happen to own a particular price comparison website there is a concern that could create a conflict of interest whereby their products are promoted over others.

"When someone searches for something, are they necessarily getting the best deal for them, or are they just getting the deal the website wants to give them?"

The review of 14 PCWs will question company heads about "whether the customer or profit is really at the heart of a business model", and survey site users to find out how they browse.

It will investigate the "expectation gap" for customers who save money but discover they are not covered as well as they thought and ask whether consumers are "misled into purchasing products or add-ons which do not meet their needs".

Mr Cross said: "Price isn't necessarily the best marker of an insurance deal. It's all very well getting the cheapest insurance cover, but when you come to claim, if you find out that you can't, then obviously that money's been spent for nothing."

A risk review in early 2013 highlighted the risk that firms relying on automated comparison algorithms to serve millions at low cost might not be able to properly scrutinise their own practices.

But the FCA stressed PCWs "perform a valuable service for millions of people" and said almost half of all internet users had used them to research motor insurance, with four in five going on to buy it through the same site.

The regulator, which replaced the Financial Services Authority in 2012, has powers to force changes in adverts and promotions or to issue fines in the most serious cases.

It said there was no suspicion of deals being actually misrepresented.

Clive Adamson, the FCA's director of supervision, said: "We've all used a price comparison website, so we know how simple they make buying motor, travel or home insurance. We don't want to lose that convenience, but we do need to ask the question, 'does cheapest equal best?'

"We want to get to a place where consumers that use these sites buy with the confidence knowing that they have all the relevant facts."

In September FCA chief executive Martin Wheatley told Parliament he was "very wary" of PCWs because they were all being "gamed" .

An FCA spokesman claimed his remark had been "just a personal view."

The price comparison website MoneySupermarket said it was an independent company with no ties to insurance groups.

It said: "MoneySupermarket gives customers the information they need to save money on the products that suit them. If a policy doesn't offer breakdown insurance, for example, we'll show the extra cost of that.

"Customers have different needs; nearly half our customers do not buy the cheapest product on the market and prefer to select on features or brand."

The company said it received no commissions for its services, simply receiving a flat fee every time a customer buys a policy, and that these fees are "completely independent" of policy price.

Richard Lloyd, executive director of consumer group Which?, said: " We welcome the Financial Conduct Authority's review into price comparison sites. We found they claim to do all of the work for you but they don't always guarantee people the best deal or even the right one.

"We want comparison sites to treat customers fairly by being upfront that they don't cover the whole market and more transparent about what is and isn't included in the policies they're selling."

The group, which compares products by expert review and also runs a comparison site for energy deals, said only 32% of its members trust comparison sites to find the best price, with even the highest scoring company receiving only 48% customer satisfaction.

In May it found a difference of over £1,500 between similar car insurance quotes on 10 different sites.

The customer watchdog Consumer Futures said PCWs vary in their transparency and quality of customer service and pushed for a voluntary accreditation scheme.

Chief executive Mike O'Connor said: "Price comparison websites have been a boon for consumers, but in an era of declining consumer trust in many markets, they may be on thin ice.

"Urgent action is needed to reassure consumers that all price comparison websites are playing fair. The best companies will welcome a level playing field which avoids a race to the bottom with sites chasing commissions rather than doing their best for consumers."

He said companies in general should hand over to their customers all the data collected about their habits, so that they can feed it into price comparison websites.

Insurance group Admiral owns, while Esure has a 50% stake in


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