Choice dismisses APRA insurance comparison concerns
Consumer advocacy group Choice has rejected criticisms of insurance comparisons websites brought by the Australian Prudential Regulatory Authority (APRA) stating that its arguments are those “typically heard from vested interests that would prefer not to support commercial switching sites”.
Choice made the comments as part of its submission to the Financial System Inquiry (FSI), part of which was used to refute claims by APRA that insurance comparison websites focused mainly on price and had the potential to confuse consumers while also driving up the cost of insurance.
APRA stated in its own FSI submission that insurance comparison sites, which it referred to as aggregators, were useful where a product was largely homogenous and where price was the main distinguishing feature.
APRA also stated that with an exclusive focus on the price of insurance premiums consumers may not be aware of the terms and conditions of the policies under consideration while insurers may compete purely on price instead of the full value of the insurance services on offer. This could in turn lead to higher prices for insurance policies as insurers sought to recoup costs from commissions and incorrect pricing of risk.
Choice rejected these concerns stating the costs of acquiring customers were factored in by insurers and would not raise costs.
Choice also rejected APRA’s claim “that the competitive pressures that comparison sites bring to the market are not in the interests of consumers. It is equally perplexing that APRA argues against customer switching because of adverse impacts on profit margins”.
“As long as governments wish to support a competitive market for banking and insurance products they should support the role of high-quality comparison sites and recognise comparison services as an effective market-driven solution to address the pitfalls of overly complex financial markets.”
Online insurance has become an area of concern for financial advisers who offer risk insurance advice with a number of planning groups criticising the low threshold of advice provided while the Financial Services Council last year linked its presence to higher levels of churn.
Choice currently operates an online comparison site for banking products for which it claims does not receive any payment and stated there were concerns with a number of commercial operations in the local market around sponsored links and commissions and incomplete coverage of the insurance market.
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