The middlemen rise again, but in disguise

Stuart%20Smith%20120x120What at first sight looks like some good, old-fashioned knocking copy may turn out to be a much more serious and emblematic battle. Last week, Direct Line – the direct response home and car insurance company – launched a ferocious attack on increasingly popular online price comparison sites.

According to Direct Line, there is much to criticise; hypocrisy, parasitism and dishonesty being among their more salient shortcomings. Of course, Direct Line does not use those words in its TV and press campaign. What it says is that the price comparison sites masquerade as consumer champions but in reality they are like old-style insurance brokers with their “commissions, jargon and forms”. Direct Line from 1985 onwards helped transform the insurance market by cutting out the middleman and dealing direct with consumers, runs the argument; now “unfortunately the middlemen are back. But this time they’ve gone online, as price comparison sites.”

It’s a well-timed punch. Several of these price comparison sites have recently come to prominence not on account of the selfless public service they allegedly provide, but because of the astronomical valuations they are attracting as businesses. Moneysupermarket.com, for example, is paving the way for a £1bn stock market flotation; Admiral, owner of Confused.com, is considering selling the company for about £700m; and only last year uSwitch was sold to US media company EW Scripps for £210m.

Direct Line goes straight for the financial jugular in suggesting the foundations of this business model are built on sand. The most obvious failing of comparator sites, seen from a consumer perspective, is that they make their money not from advertising or subscription but from the aforementioned commissions generated by the companies they feature.

Though the commissions may (or may not be) flat, the very fact that money is changing hands suggests a conflict of interest between the intermediary (supposedly acting in the consumer interest) and consumers who believe they are receiving comprehensively objective advice. For what if the best value service refuses to pay a commission and is thereby excluded from comparison? Some time ago BT complained of precisely this injustice at the hands of uSwitch when it came to broadband pricing comparisons.

Nor is the restricted range of comparison merely a matter of money. Some brands, like Co-operative Insurance, refuse to participate on principle. Norwich Union Direct won’t appear on Moneysupermarket.com. And Royal Bank of Scotland, which owns Churchill, Privilege and – guess what? – Direct Line, refuses to appear on any comparison site.

So far, so bad. Yet we might do well to question the motives of these self-excluders. Are they afraid of being held to account by a one-criterion-for-all comparison matrix which prevents them from taking refuge in the fuzzy warmth of confusion marketing? That’s certainly the view of Moneysupermarket.com managing director Richard Mason, who points out that when they do do comparisons of Direct Line products, very rarely do they emerge at the top of any table.

Yet all this sniping is subsidiary to a broader point. Irritating though it may be for brands to find themselves and their value-added propositions commoditised, the fact is the price comparator has many advantages for the consumer. Whatever its current shortcomings, it offers a degree of transparency unthinkable before the age of the internet. Consumers like the empowerment it gives them, not to mention the easily accessible choice. And that’s all that matters really, because the consumer is always right.

Stuart Smith, Editor

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