This is one of the less strong complaints about the current body politic. Advertising costs money, so it does:
Up to a third of drivers’ insurance costs go on secret commissions charged by price comparison websites, which can be as much as £160 per policy.
These websites charge insurers to display their policies to consumers. Most insurers have little choice but to pay up, as the majority of car insurance is bought through price checking companies.
The costs are then passed on to drivers through higher insurance prices. These flat fees are typically around £60, but range from £40 to £160.
The average comprehensive motor insurance premium is £485 a year, according to the Association of British Insurers trade body, meaning these commissions make up 8pc to 33pc of a typical driver’s bill.
The process of selling us something, anything, costs money. This is true whether the seller uses print, word of mouth, online, comparison engines or anything else. The question therefore is not how much does the one method cost in and of itself, but what is the cost of the one method relative to the others?
That all insurers – near all at least – do use the engines means that the engines are more efficient, cost less, than the alternatives. Meaning that the actual cost to us consumers is negative for the engines, not positive.
If this were not so then there would be a niche in the market. Create the insurance company, build the policies, and then don’t advertise at all. Save that 33%. Just have the one website and see how the startling price reduction floods you with bargain seekers entirely driven by that word of mouth.
Hmm, it doesn’t work that way? OK, so the comparison engines aren’t costing the insurers then, are they? Given that being an insurer doesn’t work in the absence of the engines.