Price Comparison: Is All Insurance the Same?

The concept of a price comparison site is compelling. It lines up all the features of all the available products and shows the buyer the price of each. The buyer then simply picks the cheapest one with all the features that they want and buys it with a few clicks.

Great concept, but there are two very important assumptions in this model:

  1. A website can capture and clearly present all the intricate features of a complex contract of insurance.
  2. The buyer understands the precise nature of all of the features presented. For example many homeowners' insurances will include legal expenses. It is easy to assume that this might cover claims against your business activities if your company is registered at your house and you work from home. It is unlikely that all aspects of his are covered. The details will be down to the precise list of covered risks and exclusions in the policy document. Fore example pages 22 to 24 of the Direct Line Home Insurance Plus policy detail the exact cover it gives for legal expenses.

This is where the concept of price comparison sites starts to break down. Policy A and Policy B might well both have £100,000 of cover for legal expenses, but the cover on Policy B might be far wider and include the risks faced by the buyer whereas Policy A might have some very restrictive exclusions.

Insurance is a contract between the insured and the buyer, the insured. Each insures produces their own contract terms and everything is subject to general contract law and some specific insurance laws. The risks that are and are not covered can get complex and intricate. A clean, clear webpage simply cannot capture this level of detail. A good insurance broker should be aware of the detail, analyse these subtle differences and make them clear to you. In order to compare insurances properly you have to read and understand the policy documents.

There is a place for price comparison websites. We would recommend using price comparison sites for:

  • Motor insurance for a car with a value of less than £3,000 - unless it is a classic car
  • Pure home and contents insurance for a three bedroom or smaller home

In both of these cases the difference between policies is likely to be small. The cover for subsidence will be an issue for the home insurance. You should consult an insurance broker if you live in a high subsidence risk area.

For lower value cars, the major cover on motor insurance is the liability cover for injuring others in an accident. This cover is specified by law and so there is little scope for difference. As the value of the car goes up there are many different covers. For example, the best motor insurance will pay to repair a supercar even if the cost exceeds the replacement cost - ie the insurer will repair rather than write off a car even if writing off is the cheaper option. Better motor cover will also pay for an agreed replacement vehicle if yours is written off rather than just a book amount of cash. This means that you can really be sure that you can replace your car if it is written off.

There is a place for price comparison websites, but as insurance cover gets more complex and more features are added then it is advisable to use an insurance broker to analyse and explain all of these features. Here at MRSL Enterprise we obtained stock insurance for a business that makes archery equipment among other historical items. The owner had struggled to find insurance for archery equipment. We were delighted to get cover with the primary activity of the business stated as Manufacture of Archery Equipment.