Why the cost-of-living crisis has been surprisingly bad news for price comparison websites

The cost-of-living crisis should present a fabulous opportunity for price comparison websites to demonstrate their value to UK consumers. But, in reality, the sites have been hit by several headwinds – and the savings from switching have been dwarfed by the rise of energy bills and other costs.

Last month’s announcement that Amazon is to enter the insurance market in an attempt to challenge price comparison websites sent a chill wind through the sector. Whilst Amazon’s offering is limited initially, there is no doubt that the e-commerce giant has the technology and resources to mount a serious challenge to price comparison websites. That said, Google tried and failed in the UK insurance and financial price comparison market as long ago as 2016.

Home and motor insurance comparison has long been a mainstay of many of the major price comparison websites. There were two key drivers of this: customers have to renew annually and there were often large savings to be made by switching.

But in January this year, the FCA introduced new rules that forced insurers to charge new and existing customers the same prices. This means that insurers have had to end the practice of offering attractive rates to lure new customers and then gradually increasing premiums over time – known as price walking. The result, according to industry analysts Consumer Intelligence, has been a reduction in shopping around and, crucially for price comparison websites, a reduction in consumers switching providers.

Energy switching was also a core service for price comparison websites – and an important revenue driver – with consumers being urged to shop around for a better deal whenever their fixed tariff expired, or for those on variable deals, every 12-18 months. But the huge spike in energy prices over the past year or so has seen this market grind to a halt. For most consumers, the cheapest tariff has been OFGEM’s ‘Energy Price Cap’ rate which is the default offer from most providers. The government’s energy price guarantee means that there is no hope of the switch market making a comeback until after April 2023, at the earliest.

With insurance and energy squeezed price comparison websites have had to fall back on current account switching, credit cards and loan/mortgage comparison.

With many banks offering lucrative current account switching incentives – of up to £200 – this is great for customers although not something they are likely to do very often.  The credit card market has been hit by the rise of Buy Now Pay Later borrowing, and there are also fewer balance transfer products for consumers to use. Again, switching credit cards isn’t something that consumers can do too regularly.

Adapting to survive

Given these pressures, it’s no surprise that providers have been looking to diversify – for example into cashback. And we’ve seen consolidation in the price comparison website sector with some of the major sites now having a common owner and others becoming part of larger media brands. Whilst one major provider recently increased its profits forecast the fastest growth was actually delivered outside ‘traditional’ price comparison.

Of course, the major price comparison websites still slug away with huge advertising budgets. Nowadays the goal isn’t selling the benefits of comparing insurance or credit cards. It’s now a battle for consumers’ loyalty between the sites themselves. Because once you are registered with a site or have downloaded their app, not only is it quicker and easier to renew your insurance the following year, but you may just consent to marketing for all the other products they offer too – price comparison is nothing if not a big data play. In return for your data (and loyalty) some sites offer discounts on everything from coffee to cinema tickets.

In the past, price comparison websites positioned themselves as consumer champions and hubs for money-saving advice. In essence, their message was simple – always make sure you shop around. Over the past couple of years, that advice has gone mainstream, with Martin Lewis – whose own site was acquired by a price comparison website– having his own prime-time TV show, and every newspaper and news website featuring money-saving hacks. Similarly, there’s no shortage of TikTok and Instagram influencers sharing their secrets to saving money and living on a tight budget.

The ubiquity of money-saving advice isn’t the only problem. For many households who are having to choose between heating and eating, the savings they can make by switching are just a drop in the ocean.

Part of the problem, of course, is that price comparison websites are paid by the providers that appear on their websites. So it isn’t in the sites’ interests to campaign against bad practices, or to call out providers giving bad service or poor deals.

The space needs a new challenger voice that truly champions and campaigns on behalf of consumers.

Ian Williams, Director

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