Weird isn't it how things seem to go in circles in the UK? Take insurance for example. Since 1985 Direct Line built a new business from scratch with the simple promise to cut prices for customers who applied to them directly. Their slogan was 'buy direct and cut out the middleman', which cut out brokers and their commission.
Even if this meant ringing up a call centre, customers flocked in and Direct Line has never looked back. However, by the time other big brand insurers copied Direct Line, the Internet had also developed to the point where quotes were available on-line. It was hard and time consuming to find out who offered the best deal between the direct insurers. Ringing around and looking up websites individually, especially in the days of dial-up internet connectivity, took ages.
To meet the public demand for a quick and easy route to low premiums the price comparison website was created. Moneysupermarket.com for example launched in late 1999. Since that time there were countless in insurance comparison site start-ups, but the big and successful brands like Money Supermarket, Go Compare and Compare the Market drew ahead of the pack and have now become household names.
What people tend to forget is that these price comparison websites are in fact little different from insurance brokers. They offer a service and the insurance companies pay them handsomely to get their business. Therefore price comparison site customers need to understand that the website's fees and commission are added to the price of the policies they buy.
So do price comparison websites save you money? Probably not! Many people use them to check prices so they get an idea of how much their cover will cost, and then decide to do look for alternatives. With broad band and the accuracy of Google search, savvy web users are usually able to find a much better price elsewhere. Equally, if the needs of the customer are anything other than straightforward, the basic low price products the comparison sites offer can fall short of the customer's requirements.
Can insurance providers charge less for customers who chose not the buy from them via price comparison websites?
This question created a huge issue for comparison websites as many of the insurance companies have their own direct to public websites. The answer should be yes, it should always be cheaper to go direct. However this would completely undermine the comparison website business model. They must make a return for the millions they spend on advertising. Therefore any insurance provider who wants a slice of the UK's big brand comparison site customers can only do so if they agree not to sell the product for less elsewhere.
Traditionally only the big spenders on advertising attracted customers. This remains largely true, however the internet enables consumers to ignore the hype and find the cover they need without the price being inflated by marketing costs.
So have we come full circle? It cannot be long before some smart technology will wipe out the price comparison websites by portraying them as the new 'middlemen' who should be 'cut out' of the cost of insurance. Currently, only smart users of the internet can find a better deal for themselves. However knowledge of these low-cost alternatives is growing particularly through social media. Huge numbers of people can now benefit from information that was once only available to the few.
Dennis Haggerty FCII M IDM Marketing Manager iprotectinsurance.co.uk specialises in the supply of low cost on line Lifestyle Protection, Income Protection and Mortgage Payment Protection Insurance.
Key to the success of i:protectinsurance has been the focus upon supplying a product range that is available exclusively on-line. By eliminating the usual costs associated with selling insurance: telesales teams, direct mail, middlemen and commission, i:protect can offer customers exceptional value for money.
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