Never compare insurance policies based on price alone

Insurance comparison websites simplify the insurance purchasing process and most people now buy insurance through these sites. Once you know what class of coverage you need, type a few details into one of these sites and you’ll get instant access to multiple insurance companies, with the cheapest quote displayed in seconds.

While the process of buying insurance, especially car and home insurance, may seem simplified, the same cannot be said for the products.

The insured enters into a contract each time he/she purchases an insurance policy and like any contract it must be carefully examined to ensure it is suitable for the purchaser.

The frequency of advertisements in both print and electronic media by the owners of these sites drowns out the complaints and murmurs of people who may have had a claim rejected because they based their decision to buy insurance on price (premium) alone .

To illustrate how using price alone to select an appropriate insurance policy can be problematic, let’s look at how the price of a burger is determined.

You can pick up a burger from a McDonald’s restaurant for £0.99, but the same shop also has a burger made with a similar sized bun for £5.99. The difference in the price of the two burgers is the topping.

While the cheaper burger only contains beef, the more expensive offerings will likely contain better quality beef, possibly bacon plus lettuce, onion, mayonnaise, mushrooms and pickles.

The £0.99 burger (let’s call this the bald burger) may appeal to some but may not necessarily be what others want.

The £5.99 (ROBUST burger) burger, while more expensive, may be just what the other person needs to satisfy their appetite and is willing to pay extra to meet their needs, provided they’re on the aware of the extras that add up to make this other burger expensive.

Bare vs Extensive Policy

Similar to the example above, insurance policies can also be said to be bare or ROBUST/comprehensive. However, it is not always easy for every insurance buyer to tell the difference between the bare policy and the comprehensive policy, especially when they are presented in abbreviated versions with the cheapest on top.

Risks covered by default by insurer ‘A’ can be sold as an add-on by insurer ‘B’.

So the premium of ‘A’ may seem higher than that of ‘B’ because the standard policy offered by ‘B’ is basic cover. If you then choose this policy because of the cheaper price without realizing that some of the risks you need are not included, this could lead to a dispute when a loss/claim is reported.

Potential conflict of interest

Some comparison websites are wholly or partly owned by insurance companies and so a conflict of interest may arise. Thus, the results of stated premiums may skew in favor of the parent or partner companies.

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Operators of these sites can also be influenced by the high commission rates offered, which leads the sites to promote certain brands.

Some insurers are not included

At the time of writing, some of the UK’s largest insurance companies, notably Aviva and Direct Line, are not on comparison websites, so it is possible that improved terms can be obtained from companies not on the list.

Finally, it is worth noting that these comparison sites only serve as intermediaries, linking the prospective buyer to the insurance companies. They only present premiums generated using algorithms provided by insurers and then direct a buyer to the insurer’s website with the chosen quote. In the event that a dispute arises that can be traced to a misunderstanding at the time of citation, these firms are unlikely to assume responsibility.