Flex Luthor is a graduate turned entrepreneur known for his involvement in the widely opposed attempt to launch the first price checker for comparison sites, comparechecker.com

Directline, Aviva and other direct insurers are trying to make a comeback by refusing to allow their prices to appear on comparison site listings. Others such as AXA promise discounts to consumers who “come direct”. Can they really offer better prices by cutting out the “middle man”?

Comparison sites

Moneysupermarket claims to offer savings of up to £329, Gocompare up to £212 and similar amazing figures are thrown around by the crop of superaggregators (the most prominent sites, with the most traffic and marketing spends). Remaining shortcomings include a lack of absolute market coverage and material differences in prices between the major sites for the same insurers.

Direct insurers

Axa car insurance

Axa Car Insurance recently made a return to direct car insurance claiming to offer  drivers up to 90% no claims discount, the highest level available in the market by far. Conditions required to gain this mammoth discount include 8 years or more no claims discount. The insurer reckons there are nine million drivers that meet this criteria, and is spending £10m on getting back into direct motor insurance.

 So what does this mean for comparison sites and shopping around in general?

Direct insurers are offering discounts to direct buyers on top of any no related claims discount (AXA offering £30 off). AXA claims “We have to pay comparison sites commission, and this is to cover that cost. We want to encourage customers to come to us direct.”

In reality such discounts are almost meaningless as it depends on the price you start with, and in reality only the net price is relevant .

 Ian Crowder at the AA said: “Insurers are realising that customers who come via comparison sites are less likely to be loyal so there is little incentive to offer reduced rates.”

Translation: Offer a small discount now. Charge more in the long run by promoting apathy that is fleeting in this market dominated by the superaggregators

From the consumer’s perspective there is only a saving to be made if they are willing to search all of the insurers on the panel of the comparison sites manually. Find the cheapest in that respect and go direct. It will never be an argument that going direct is cheaper If you then decide on a brand in isolation. A £30 discount is false economy if the price is more expensive than non-discounted prices.

It raises a question on the part of the insurer. IF they aren’t paying commission to the comparison site who are they paying it to (TV channels, marketing companies etc.) and at what rate. Just by going direct does not save the insurer money. They have to market their product like any other in a competitive market place. Customer acquisition is not free.  

Conclusion

The insurers cannot deny the truth in the comments made by Lee Griffin of insurance comparison website Gocompare.com “It is often possible to get very similar cover for a much lower rate simply because each insurer will have a very different view of you as a risk and some insurers will not have increased their rates as much as others.”

According to the AA index average prices are still lower on comparison sites, at £698 against £986 if you go direct.

They are undoubtedly a less useful insurance pricing system in a market dominated by superaggregators offering a hundred plus prices.

It remains that the consumer still needs a transparent system to access all varieties of pricing information for their car insurance and other personal finance products. The market has been waiting a long time for it and this attempted regression toward a less transparent market of walled gardens (something true of comparison sites offering different prices and direct insurers keeping themselves out of the comparison site results altogether.) is evidence that It is long overdue.