It’s a familiar scenario for people buying personal insurance online – your home or motor renewal comes through, and the premium’s up 10% or even 20%. 

Your risk hasn’t increased, and you haven’t made a claim, so you feel a bit hard done by. But can you really be bothered to switch insurance provider? Finding a better deal out there requires investing some serious time and effort to get quotes from multiple providers. 

Tapping-in details about your home’s age, size and construction can get terribly tedious the 10th time around. If only there was a website where you could type the information once and then be presented with prices and products from all the major players… 

Australia has comparison websites for life insurance and small business insurance products, but nothing – or at least nothing comprehensive – for home or motor insurance. Some do exist, but most of the major players don’t participate, so they provide limited value. They are prevalent in the UK, so why don’t we have them here? 

In 2019 the Australian Competition and Consumer Commission (ACCC) recommended a national home insurance comparator be investigated by the Federal Government, but nothing ever came of it. 

However, with premiums in home insurance soaring as insurers adjust to the impact of a spate of natural catastrophes and higher reinsurance costs, is it time to revisit the issue? 

An Actuaries Institute report found premiums had gone up by an average of 28% in the past year, the steepest rise for two decades. The research estimates that 1.24 million households, or nearly one in eight, are facing home insurance affordability stress, up from one million a year ago. 

Wouldn’t a price comparison website help consumers find the best deal and increase competition to drive prices down?  

The industry answer to that question has always been a resounding “no”. 

The major personal lines insurers believe a comparison website will encourage consumers to purchase solely on price and not consider whether the cover is appropriate, exacerbating already existing issues around consumer understanding.  

And an Australian Securities and Investments Commission-run comparator for north Queensland, which has been operating since 2015, has had little to no effect on high premiums in the region.  

When comparison sites began appearing in Australia about 20 years ago, the major personal lines insurers refused to share their pricing models with them, on the grounds of commercial and competition confidentiality. Compared with their dominance in the UK market, comparators in Australia have struggled to make much impact.  

An industry source also tells insuranceNEWS.com.au that such sites encourage “a race to the bottom”. If one brand offers cheaper cover by cutting the quality of its product, consumers would likely respond en masse, forcing other brands to do the same. The result would be a spiralling reduction in quality of cover. According to some, this has already happened in the UK. 

There’s also the issue of transparency. Insurance comparator sites receive a commission from the insurers they point consumers to, which raises questions about their reliability.  

Insurance is a complex product and there can be a wide range of inclusions, exclusions and definitions. A comparator would find it hard to compare “apples with apples”. 

But after a push from consumer groups, Federal Treasury says it is looking at standardising natural hazard definitions and has flagged future public consultations. It’s seeking views on which definitions are most in need of standardisation and “how the standard cover regime could be changed to ensure it is fit-for-purpose”. 

Some consumer groups believe greater standardisation of definitions and cover could make a comparison website a more realistic prospect.  

“Currently, to compare general insurance on a traditional comparison website is almost impossible, to the point that it might be misleading,” Financial Rights Legal Centre Senior Policy and Advocacy Officer Drew MacRae told insuranceNEWS.com.au. 

“But in an ideal world you have standard cover, and you have at least a base level understanding of what you are going to be covered for. 

“In a world where that exists, then you can have comparisons on price. 

“Consumers are desperate for it. That’s why some get sucked into the conflicted or limited comparison sites that are out there. 

“But if you want a comparison website, you’ve got to have standard cover and standard definitions or it’s never going to work.” 

Former ACCC chairman and economist Allan Fels believes a mandatory general insurance comparison website should be given “serious consideration”. 

“I find the use of the phrase ‘race to the bottom’ as indicative of a hostile attitude to letting consumers experience the benefits of competition,” he tells insuranceNEWS.com.au. 

“There is price competition in many industries, and most firms – especially the more efficient, and the ones offering the best products or service – not only survive but often flourish.” 

He says price competition grows most markets, because lower prices expand demand. 

“The fact is that in all industries price comparisons are made by consumers formally or informally, with or without good information. 

“Sadly in some cases consumers have to work off poor or limited information. A good price comparison website enhances the quality of their choice and makes the quality of markets better. 

“As to the claim that price competition will lower the quality and scope of insurance, this is not borne out by the experience of price comparison websites in other industries. 

“If a firm is worried about a reduction of quality, it can positively advertise that its product has many positive attributes, and does not have the weaknesses of its competitors.” 

The Insurance Council of Australia says the industry is committed to ensuring consumers are “equipped to make well-informed decisions” about the products they purchase. 

“Comparison websites for personal insurance generally provide comparison only on price so can lead to policyholders not having the cover they need,” a spokesperson told insuranceNEWS.com.au. 

“That’s why it’s important for consumers to do their own research to understand what the policy provides as well as how it compares on price.” 

There appears to have been no change in position from the leading insurers towards online personal lines comparators, and there is scepticism as to whether such sites are part of the solution to current affordability issues in home insurance. 

This is because the crux of the issue with home insurance isn’t a lack of competition, or high insurer profits, but the underlying risk. Premiums are indeed going up fast, but insurers are still losing money on home insurance. 

Until long-awaited government investment in disaster risk mitigation starts to have an impact, some homeowners will continue to face affordability issues. And a comparator site won’t do anything to make that situation better.  

In the meantime, if you want a better deal, it will require setting aside time to research the different options from the many different insurance providers. 

Alternatively, if you want someone to help you compare prices AND give you expert advice on coverage, there is another option. Try giving a broker a call.