The Financial Conduct Authority (FCA), which regulates all companies offering consumer credit, is concerned customers are buying insurance on the basis of the “headline” price they are being presented with but then find they are not as well covered as they thought they were.
Clive Adamson, the FCA’s director of supervision, says the investigation will determine whether rapid growth in the sector has been at the expense of “transparency and fairness”.
He adds: “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.”
Elsewhere, the FCA will look at potential “conflicts of interest” where the price comparison sites are owned by the insurers they are recommending. It will also look at “possible inappropriate use of consumers’ data” and whether people are ”being directed towards unauthorised insurers”.
Fourteen price comparison sites will be investigated, which the FCA says accounts for 90 per cent of the market.
In a statement MoneySupermarket’s chief executive Peter Plumb welcomed the review.
“MoneySupermarket gives customers the information they need to save money on the products that suit them. It’s a case of helping people find the same cover for less, or better cover for the same price – or less. If a policy doesn’t offer breakdown insurance, for example, we’ll show the extra cost of that. We offer customers the widest choice from over 148 brands, which is more than any of our competitors.”
Separately, the FCA is reportedly set to cap the cost of payday loans. According to the BBC, the restrictions would be on charges such as interest rates, arrangement and penalty fees.