How price comparison websites affect market performance in the UK

1. How Comparison
Websites Affect Market
Performance in the UK

2. ©XPotential 2015 2
What is a Price Comparison Website?
 A vertical search engine that shoppers use to
filter and compare products based on price,
features, and other criteria.
 Aggregates product listings from many
different retailers but do not directly sell
products themselves
 Commonly used to compare insurance (car,
home, travel) and financial products such as
savings and current accounts
 Rapidly increasing in popularity among
consumers and are a key distribution channel
for retail general insurance (GI) products,
especially for private motor insurance. It is
estimated that one third (1) of the 26.6m(2)
motor policies written in 2013 were sold
through PCWs
Source: TR14/11: Price comparison websites in the general insurance sector
www.wikipeddia.com

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How Price Comparison Websites Work
 Price comparison websites work best in
commodity markets such as car and home
insurance.
 These markets are defined by relatively high
product comparability and low consumer
involvement and loyalty. Consumers assume
little difference between products and are
considered low risk by most.

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How Price Comparison Websites Work
 They collect data through a data feed file.
Merchants prepare these data files and make
them available to the shopping search
engines. This data is then imported by the
comparison website.
 Consumers select which service they require
e.g Car Insurance, Credit Card etc and then
enter in some personal details before a list of
quotes are shown from a range of suppliers.
 Products for individuals such as insurance will
be priced in accordance with the individuals'
circumstances and personal information.

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How Price Comparison Websites Make Money
 Advertising on the website
 Sponsored listings, whereby companies pay
to have their products appear at the top of
search results.
 Commission – Consumers pay around £650
million a year in commission
(www.moneywise.co.uk)
Source: www.ehow.com

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Why Consumers use Price Comparison Websites
There are 3 main reasons why consumers use
Price Comparison Websites:
Consumers see little or no difference in product,
service or benefits between companies
To locate the lowest possible price on a specific
item from a merchant with a good reputation
(cost-driven)
To compare prices for a specific product or
service, accessing information and reviews in
order to make a selection
Source: www.ehow.com

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What do Consumers use Price Comparison Websites for?

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Price Comparison Website Usage
 With price sensitivity now an important
part of how the market is assessed by
consumers, the roles available to
marketers have changed.
 Over the last decade, companies have had
to become more sophisticated in how they
generate their prices in response to the
popularity of aggregator sites.
 Some 56% of buyers had used an
aggregator in the last two years, while
52% switched or purchased directly
through one of these platforms, according
to a report from Consumer Futures.

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Who are the Key Players?
The four price comparison websites (PCW) with
the greatest market presence:
www.gocompare.com
www.moneysupermarket.com
www.comparethemarket.com
www.confused.com
85% of PCW users have used one or more of
the big four websites
Generating awareness for these sites is hugely
important and to do this many of them have
created some very noticeable and annoying TV
adverts
Source:www.marketingmagazine.co.uk
Consumer Futures Article
Price comparison websites: consumer perceptions and experiences Article
A report by RS Consulting for Consumer Futures

10. ©XPotential 2015 10
Key Player: Gocompare.com
 Gocompare was the first comparison site to
focus on displaying product features rather
than just listing prices
 It provides a comparison service for
vehicle, home, travel and pet insurance,
breakdown cover, gas and electricity,
broadband, loans, credit cards, mortgages
and other financial products through
preferred providers such as Energylinx and
Experian
 Based on independent research by
Consumer Intelligence 01/09/14 to
30/09/14, www.gocompare.com was rated
as the no.1 price comparison site in the UK

11. ©XPotential 2015 11
Key Player: Gocompare.com
 2010  2014

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Key Player: Moneysupermarket.com
 A British based Price Comparison Website
specialising in financial services
 The website enables consumers to
compare prices on a range of products,
including mortgages, credit cards and
loans
 In 2013, MoneySuperMarket achieved
revenues of £225.6 million for the full year

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Key Player: Moneysupermarket.com
 2011  2014

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Key Player: Comparethemarket.com
 A UK Price Comparison Website that is part
of the BGL Group
 Comparethemarket.com launched in 2006 as
a car and van insurance comparison site
offering customers the chance to compare
quotes from a range of providers. Over the
years they have grown and developed,
introducing new products including home
insurance, bike insurance, and money
products such as credit cards, mortgages
and loans.
 In 2013 comparethemarket.com was voted
Best Website in the Comparison Sector by
websiteoftheyear.co.uk

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Key Player: Comparethemarket.com
 2009  2014

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Key Player: Confused.com
 Confused.com was the first price
comparison website in the UK and is a part
of the Admiral Group, a motor insurance
company.
 They started as a car insurance price
comparison website and since then has
developed to specialize in general
insurance and financial services.
 Confused.com now offers their customers
to compare prices of trusted household
names for car insurance, home insurance,
gas, electricity, holidays, travel insurance,
pet insurance and money products such as
credit cards, savings and life insurance.

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Key Player: Confused.com
 2012  2014

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Consumer Perception and Experience
 77% of consumers used a PCW to switch
car insurance
 37% used a PCW to switch their energy
supplier and home insurance.
 Usually, most Price Comparison Sites
users would check 2 or 3 websites
before making a decision
 They are concerned of their privacy by
giving away too much information.
“Around 10 million people use Price Comparison Websites each year in the UK. They're quick,
convenient and save us a lot of time shopping around. But not many of us realise that we're
paying around £650 million a year in commission for the privilege.”
www.moneywise.co.uk

19. ©XPotential 2015 19
How Price Comparison Websites have Changed the UK
Market for Consumers
Comparison Websites have delivered a positive
change to the UK insurance market
They have:
Increased choice of products
Weakened the brands of suppliers
Made products and services transparent for
consumers
Encouraged customers to shop around for their
insurance policy’s
Reinforce that many products offer exactly the
same benefits
Source: The ABI’s (association of British Insurers) response to the FCA’s review of Price Comparison Websites, March 2014
https://www.abi.org.uk/~/media/Files/Documents/Consultation%20papers/2014/03/FCA%20Thematic%20Review%20of%20Price%20Comparison
%20Websites.pdf

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 PCWs are now the dominant distribution
channel in some key insurance markets
 They allow new insurers to enter the mass
market very quickly and with a limited
budget
 The ‘big four’ PCWs have a strong position
within the market, who have a large number
of insurers on their panel. However they are
not always as keen at maintaining their
relations with insurers, as they are
sometimes in a powerful negotiating position
compared with insurers
 Insurers have also found PCWs challenging
when change is required in the market that
directly benefits customers but not PCWs
How Price Comparison Websites have Changed the UK
Market for Insurers
Source: The ABI (association of British Insurers)

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How Price Comparison Websites Affect Market
Performance in the UK
 According to The Financial Conduct Authority (FCA), many
price comparison websites are failing consumers' expectations,
while a number are breaking the rules. Plus, it shows that
consumers were not being given the right information to help
them make decisions.
 Some sites are owned by insurance companies or insurance
brokers, and are failing to flag up a potential conflict of
interest. Gocompare.com is 50% owned by Esure, an
insurance company and Confused.com, is owned by Admiral
Insurance. However, the site providers claim that they are in
completely separated business.
 According to www.dailymail.co.uk, it shows that Price
Comparison websites 'collude with insurers and push prices
up‘. Industry watchdogs claim some comparison websites
make deals with insurers to get an exclusive price, making
their website the cheapest for a certain product. Watchdogs
even found evidence that some websites threaten to blacklist
insurance companies if they do not agree to exclusive deals -
resulting in huge loss of business for the firms. Both
moneysupermarket.com and confused.com said they do not
believe that the deals 'are necessary for their business model'
Source: www.bbc.com, www.dailymail.co.uk, www.sky.com, www.moneywise.co.uk

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How Price Comparison Websites Affect Market
Performance in the UK
"There is a lot of money spent through
the comparison websites - because they
charge companies likes us and the Big
Six and independents a rate of
commission.
"If that rate was a lot lower, or non-
existent, the bills to customers would be
lower, because our costs would be
lower.“
Ramsay Dunning
Group General Manager of
Co-operative Energy

23. ©XPotential 2015 23
Price comparison websites continue to
squeeze out big insurance brands according
to Stickyeyes latest online financial services
report
Price comparison websites, alongside
editorial website MoneySavingExpert.com,
continue to dominate the online financial
search market, at the expense of traditional
brands such as HSBC, Barclays and Natwest
HSBC suffered a 77% loss of market share
for current account products, compared to Q1
2013
Five comparison services combine to hold
67% of the overall click share in the highly
competitive car insurance market and 78% in
the home insurance market.
How Price Comparison Websites Affect Market
Performance in the UK
Source: Stickyeyes Intelligence Report

24. ©XPotential 2015 24
 According to Skynews, it has been revealed
that customers may not be shown cheaper
tariffs on comparison websites from suppliers
who weren't paying a commission.
 An Ofgem Confidence Code is a regulator for
price comparison websites. Under this, sites do
not have to declare how much commission they
earned but are meant to display an easily
accessible list of who their commercial
partners are and display tariffs in a "fair and
unbiased way".
 Out of the major price comparison sites, there
are only two signed up including uSwitch and
MoneySuperMarket. And to sign up, it is still
voluntary not mandatory.
 Ofgem says that they like the sites to be more
transparent about their commission
arrangements with suppliers and make sure
that consumers understand the impact these
have on the results they will see. Consumers
should be informed that they are paying
commission for the site.
How Price Comparison Websites Affect Market
Performance in the UK

25. ©XPotential 2015 25
Key Learnings
 Consumers use PCW’s because they want
transparency. Many Insurance companies
are complicated and can be confusing to
consumers. If Insurance companies don’t
change then they will loose even more
market share to PCW’s
 Traditional companies need to be clear on
the benefits they are offering customers
as more than often they are competing
with PCW’s based on price and not the
service or benefits
 There is an opportunity for Insurance
companies outside of the UK in certain
countries to be the first to create a PCW
as many are owned by Insurance
companies

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