Choice says comparison websites benefit consumers and the Australian Prudential Regulation Authority (APRA) is wrong to suggest they could lead to higher premiums.

In a submission to the Financial System Inquiry the consumer group says the sites play an important role in competition and help buyers make good personal decisions.

The submission is a response to APRA’s suggestion that widespread use of comparators could harm insurance industry profitability.

APRA says use of price-based aggregators could lead to insurers winning a disproportionate share of business for which they have inadvertently underpriced, which would affect the profitability of individual companies and the industry as a whole.

Insurers could respond by increasing premiums.

Choice says it is “troubled by APRA’s suggestion… that comparison sites lead to increases in insurance premiums”, adding it is “perplexing” that the regulator argues against customers switching because of the impact on insurers’ profits.

APRA says aggregators’ fees and commissions can add to insurers’ costs, but Choice says customer acquisition costs are part of business in a competitive market.

“This line of argument is typically heard from vested interests that would prefer not to support commercial switching sites,” the submission says.

However, Choice is concerned about the quality of many comparison sites and says specific regulation may be required for them.

“The [inquiry] needs to address the way in which information on products is made available, so it is readily adaptable to use in a comparison site.”