Comparison websites, which are meant to get you a better deal on your insurance or credit card, are increasingly coming under fire for misleading consumers.
You may think you are doing yourself a favour by shopping around for cheaper health insurance or better interest rates, but various consumer watchdogs have raised serious red flags when it comes to comparison websites.
In May, the Australian competition and consumer watchdog warned it would be cracking down on comparison sites that “mislead consumers in significant ways”.
In 2012, the Australian Securities and Investment Commission found some comparison sites didn’t disclose the fact they were owned by insurance providers, favoured some products over others, or only compared a small amount of the market.
Read on to safeguard yourself against getting a bad deal.
Sponsored products and commissions
Both consumer advocate CHOICE and ASIC’s MoneySmart site warn comparison sites earn commissions from insurers and providers when they sell one of their products.
Commissions and fees can also be hidden in insurance premiums, driving up the price, says CHOICE.
This makes them more likely to promote certain products over others.
“When you buy insurance through an online comparison site, a fee may be paid by the provider to the site, either as a fixed percentage of the premium or a fixed payment per sale,” the CHOICE website says.
“While all of the online comparison sites we spoke with denied commissions play any part in their product recommendations, the potential for a conflict of interest is evident – 89 per cent of revenue to iSelect’s health business unit in the financial year 2012 came from just five of their health insurance brands.”
Some comparison sites are owned by insurance providers and only compare products belonging to that company, or they compare a very small section of the market.
In a 2013 investigation, CHOICE found sites like iSelect, Choosi and Compare the Market actually provided quotes for a third of all health insurance providers.
Comparison site Finder.com.au money expert Michelle Hutchinson suggests consumers use filters on comparison sites to weed out bias.
“The comparison site might be affiliated with a specific institution or provider so the search results could be skewed. When you are searching, it’s a good idea to use the filters,” Ms Hutchinson says.
“You can rank how you want to, not how the website wants to promote. You can compare on things like lowest annual rate on a home loan, or lowest fee on a credit card, and I think that’s a good thing.”
Use the little guys
Ms Hutchinson says not to be afraid to compare smaller insurance providers when using comparison sites, as they often provide some of the best deals.
“The smaller providers can only compete on price. They don’t have the big budgets,” she says.
“They’re often cheaper because they might be online only. Bigger lenders often back them anyway.
“You definitely should give the smaller lenders a go and compare them. The lenders who are at the low end in terms of the best price in the market have consistently been there.”
CHOICE provides an independent comparison site called Compare, Ditch and Switch.
Comparison site Canstar is also privately owned without any ties to insurance providers, and has one of the broadest range of insurances on their site.