Never Compare Insurance Based On Price Alone
Insurance comparison websites simplify the insurance buying process and most people now buy insurance through these sites. Once you know the class of cover you need, you type a few details into any of these sites and instantly gain access to multiple insurance companies with the cheapest quote displayed in a few seconds.
While the process of buying insurance especially car and home insurance appear simplified, same cannot be said of the products.
The insured enters into a contract every time he/she buys an insurance policy and like any contract needs to be examined carefully to ascertain its suitability for the buyer.
The frequency of advertisement in both the print and electronic media by the owners of these sites drowns out complaints and muttering of people who may have had a claim declined because they based their insurance purchase decision on price (premium) alone.
As a way of illustrating how the use of price alone to select an appropriate insurance policy could be problematic, let us look at how the price of a burger is determined.
£0.99 could fetch you a burger at a McDonald’s restaurant but that same store will also have a burger made with a bun of similar size for £5.99. The difference in the price of the two burgers being the topping.
While the cheaper burger may only contain beef, the more expensive offering will probably have a better quality beef, possibly bacon plus lettuce, onion, Mayonnaise, mushroom and pickles.
The £0.99 burger (let’s call this the bare-bones burger) may appeal to some but may not necessarily be what others want.
The £5.99 burger (ROBUST burger) though more expensive, may just be what the other person needs to satisfy his appetite and is willing to pay the extra to meet his needs provided he is aware of the extras which add up to make this other burger expensive.
Bare-bones vs Comprehensive policies
Much like the example above, insurance policies can also be said to either bare-bones or ROBUST/comprehensive. However, it is not always easy for every insurance buyer to tell the difference between the bare-bones policy and the comprehensive, especially when presented in abridged versions with the cheapest ranked topmost.
Risks covered as standard by insurance company ‘A’ could be sold as an add-on by company ‘B’.
The premium quoted by ‘A’ may thus appear higher than that of ‘B’ because the standard policy ‘B’ is offering is a bare-bones cover. If you then opt for 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.
Possible Conflict of Interest
Some of the comparison websites are either wholly or partly owned by Insurance companies and thus a conflict of interest may arise. Results of premiums quoted could thus be skewed in favour of the parent or partner companies.
Operators of these sites may also be swayed by the offer high commission rates resulting in the sites promoting particular brands.
Some Insurers are not Included
As at a time of writing, some of the largest insurance companies in Britain notably Aviva and Direct Line are not listed on comparison websites so it is possible that improved terms could be obtained from companies not listed.
Finally, it is worthy of note that these comparison sites only serve as a go-between, linking the prospective buyer to the insurance companies. They only present premiums generated using algorithms furnished by insurers and afterward direct a buyer to the website of the insurer with the chosen quote. In the event that a dispute arises, traceable to a misunderstanding at the point of quotation, these firms are unlikely to assume responsibility.
Ikenna is a Chartered Insurance practitioner based in London with over two decades experience in Insurance operations. He has sold Insurance policies in the past, and at other times been involved in drafting / wording insurance contracts as well as helping customers through the insurance claims process.
His unique perspective on insurance is therefore reflected in his articles which he hopes readers will find incisive and beneficial.