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Comparasites

I've recently been enjoying the spat between insurers and internet providers, especially as this will spill-over into banking before too long. Here's why.

Direct Line – owned by Royal Bank of Scotland – is getting fed up with websites that compare insurance quotes. As a result, they will not have their quotes listed on these sites and have now started running a specific ad campaign to target these sites.

Price comparison sites, or comparasites as I call them because they suck the information out of all the insurance and banking websites and present their lowest cost preferred offers, are becoming increasingly popular.

The two UK market leaders – moneysupermarket.com and confused.com – are estimated to be worth a marcap of £1 billion and £700 million respectively when they IPO. Not bad for firms who turnover under less than £100m revenues and £30m profits.

Now Direct Line's point is that consumers think these sites are independent and neutral but they are not. They show their preferred insurance providers first and make their money from the commissions paid by those providers when you clickthrough and buy their insurance product. They are therefore just online insurance brokers.

Although this is the point of Direct Line's campaign, perception is reality and the perception is that the information-sucking comparasites are the good guys, whilst the rest of the direct firms are not.

In fact, Direct Line really have got it wrong themselves.

After all, Direct Line was doing the same thing 20 years ago, when they said stop paying high commissions to brokers and come to us direct because we're cheaper.

20 years ago, they broke the mould because they offered call centre direct operations which cut out the middleman. Now, they are part of the mould as the internet has allowed a new, low-cost middleman to arise – the information broker.

The comparasite.

To be honest, Direct Line, Aviva and the other traditional insurers should be willing to put their competitive spirits on the line and allow the comparasites to include them in their pricing and quote systems. Instead, they avoid them like the plague.

That is where they are really short-sighted, as this doesn't do their business any favours. I would far rather have a single price quote aggregator than go to every service provider to try to find out how much they would quote individually.

And this again shows how the internet world is changing us.

For example, in banking a few years ago, we all thought that customers' aggregating their financial dealings online using Yodlee, Checkfree, Corillian and so forth would be the future … yet most consumers' rejected that idea. We can work out our own aggregation of wealth if we want to and don't need a single portal provider to do that for us.

However, when it comes to a good deal, of course we want aggregation that gives us the best online price for commodity products such as car and home insurance … and yes these are commodities no matter how much the industry doth protest.

Soon, we'll see this spread into other financial products – from loans to savings to deposit accounts … oh my, I just realised … moneysupermarket.com does that lot already.

Ah well.

The comparasites are here and here to stay.

Start letting them take your information but don't let them suck you dry.

About Chris M Skinner

Chris M Skinner
Chris Skinner is best known as an independent commentator on the financial markets through his blog, the Finanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal’s Financial News. To learn more click here...

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