Price comparison alone is not enough
GoCompare would have you believe that that third is silly, missing out on savings, but I suspect they understand value, not just price.
Price comparison alonePrice comparison websites have seen phenomenal success in recent years. They do exactly what they say on the tin. They compare price and price alone. They conveniently ignore difference between the products that they list side by side, concentrating only on price.
They only flag up major differences – such as the policy excess on car insurance – when regulators tell them to. Regulators are again looking at price comparison websites' questionable practices and are expected to toughen the rules further so they have to make clear that they are not comparing like with like.
So, when GoCompare says there has been "a 50% increase in the number of drivers who have ditched their car insurer in favour of a better deal elsewhere", it has no evidence that they had a genuinely better deal.
All it knows is that some people are paying less for car insurance but that could be for a worse policy with more exclusions, a higher excess and poorer claims handling.
Poor serviceI think people should switch financial services provider if there is a better service offered elsewhere. They might also choose to switch if there is the same service and a better price. If there is better service and a better price, it is a win-win.
But one reason the shrewd (perhaps cynical) consumer does not switch is because the drive towards offering the cheapest – partly because of these price comparison sites – has been a race to the bottom, with service levels getting worse across the board.
There are no broadband providers that offer a decent service. All banks are the same so switching is not worth the hassle. And so on. Yes switching should be made easier for some these services, but that alone won't help. Until we get away from price-driven shopping, the relentless fall in service standards will continue.
Here's some figures from GoCompare's survey
- 28% have never switched bank accounts
- 18% have never switched mobile phone provider
- 16% have never switched mortgage lender
- 16% have never switched their home insurer
- 13% have never switched their car insurer
- 12% have never switched savings accounts
- 9.5%have never switched energy provider
It says 77%of consumers have used a comparison site in the last 12 months with car insurance being the product most compared.
But it says:
- Just 1% have switched their life insurance in the last 12 months
- Just 3% have switched their mortgage provider
- Just 3% have switched their landline provider
- Just 4% have switched their bank account
- Just 6% have switched their ISA or savings account provider
- Just 9% have switched energy provider
John Miles, Gocompare.com's business development director sums up why price comparison sites are so bad for UK PLC, for financial services, and for financial education. "A few minutes spent sorting out your finances could save you hours worrying about them," he says.
And that is the myth of price comparison sites summed up – that you can compare complex financial products in a few minutes using a website that compares price alone. The idea that you don't need the advice of an expert is staggering. Don't be fooled.