The Financial Services Authority has written to 19 firms operating insurance price comparison websites to highlight concerns about the fair treatment of consumers.
It says consumers may be being misled about the services they are receiving from price comparison sites, for example, they may believe based on the claims made by price comparison sites (or the absence of any statement to the contrary) that they are receiving a quote based on their individual demands and needs when they are actually receiving an illustrative quote based on a set of generic risk criteria.
Consumers may be unable to claim benefits against a policy purchased through a lack of opportunity to disclose all material facts, causing an insurer to refuse to pay out in part or in full on the benefits due under a policy.
It says price comparison firms enter into ‘white labelling’ contractual arrangements without fulfilling their obligation to counter the risk of financial crime. They could be assisting unauthorised firms in arranging or advising on contracts of insurance, against which a consumer may not be able to make a claim.
The letter contains proposed guidance and highlights some concerns the FSA has around the fair treatment of customers. It also asks firms to think carefully about whether they are introducing, arranging or even advising customers on purchasing a contract of insurance – and whether they need to reflect that with a change in permissions.
Firms now have until August 8 2011 to respond to the proposed guidance.
As well as asking firms to consider whether or not they need to extend their permissions it also sets out examples of good and bad practice.
Some of the areas the FSA has highlighted include:
- Making it clear that firms should take responsibility for checking eligibility or disclosure, rather than putting the onus on the customer;
- Reminding firms to check whether they hold the correct permissions, in particular where they may be inadvertently giving regulated financial advice without holding that permission;
- Reminding firms who are using a ‘white label’ service to make it clear to customers which firm they are actually dealing with and who they should complain to should they wish to do so; and
- Reminding firms that use a ‘white label’ service to check that their provider holds the necessary permissions to conduct regulated activity.