Tougher line on online insurance

Millions of consumers who buy insurance online can look forward to more realistic premium quotes and clearer information about policy excess levels and under new guidelines for the industry.

The standards published today by the Association of British Insurers (ABI) seek to address some of the key areas of poor practice identified by regulators – in particular, a tendency to put speed of providing quotes before accuracy.

The guidance – produced by the ABI, the British Insurers Brokers Association, the consumers’ association Which?, and leading price-comparison websites – sets standards in seven areas to ensure consumers have “positive experiences” when buying products, such as motor and home insurance, online.

“Using the internet can enable consumers to get the best policy at the most competitive price,” said Nick Starling, the ABI’s director of general insurance and health. “But the ease and speed of going online must be balanced with ensuring that people understand the terms, conditions and cover of the policies they are comparing.”

Companies abiding by the code – which is voluntary – should display the total price of the premium and let consumers know if any assumptions were made about their personal details or policy needs when the quote was compiled.

The policy excess – the amount of any claim that must be met by the policyholder – should also be broken down into voluntary and compulsory components, so consumers are clear about the true cost of their policy.

In addition, the guidance states that it should be made clear what cover is provided as standard, and which features are being sold as add-ons, such as home emergency cover under household insurance.

Key features about the policy, including significant exclusions, should also be made more prominent so that consumers are fully informed before buying online.

The guidance applies to brokers, insurance comparison websites, insurers and brokers selling general insurance online and is designed to strengthen existing regulations on treating customers fairly.

Today’s move followed a review of the price comparison sector in 2008 by the Financial Services Authority which found some websites were not treating their customers fairly. Among the examples of poor practice were excesses that were given as a ”total” but in fact excluded the compulsory excess. Consumers were also not given the chance to review the assumptions used to generate the quote.

The ABI is urging the industry to adopt the guidance “without delay,” but consumer groups said they would be watching to see how well the guidance was taken up.

“Which? supports measures that will lead to greater transparency and trust, and will therefore benefit consumers,” said Dan Moore, from Which?. “The ABI good practice guide is a step in the right direction, providing the recommendations made are monitored and enforced.”

The ABI intends to carry out regular reviews to see how widely the guidance has been implemented and to “identify any new issues that need to be incorporated into it after consultation with stakeholders.”

Unlike other industry guidance set for price comparison sites, these standards also apply to brokers, insurers and software houses.

“Comparison sites are very much dependent on the information that the insurance company provides,” said Hayley Parsons, chief executive officer of Gocompare.com.

“So establishing industry standards that all insurers, brokers and comparison sites can adhere to when displaying product information can only be a good thing.”

Under the guidance, insurers that refuse to provide a quote to a customer should refer that consumer to another provider who may be able to offer cover.