Price comparison websites make insurance 33pc more expensive

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 premiums.

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 exact structure of the fees is a tightly guarded secret. None of the big four price comparison firms – Compare the Market, Confused.com, MoneySuperMarket and GoCompare – would confirm what they charged.

However, the lower fees tend to be paid by the bigger insurers, which have economies of scale and can negotiate lower rates, according to Gavin Sewell of Honcho, a car insurance website. “The charges made by price comparison websites are not in the public domain,” he said. “This pricing benefits the mass market at the expense of the smaller players.”

Price comparison websites generally keep clauses in their contracts that ban insurers from selling deals directly for less. This means customers are stuck with premiums which are inflated by the website fees.

In the past, comparison companies also demanded insurers did not sell policies at lower prices through rival websites.

The Competition & Markets Authority watchdog banned this sort of practice in 2014 for being unfair but the British Insurance Brokers’ Association (Biba), a trade body, wants a stronger crackdown on price restrictions.

It said: “In our opinion, this is anti-competitive and results in poorer customer outcomes.”

In theory, price comparison websites should compete with each other, charge insurers lower fees, and offer cheaper cover than customers could secure elsewehere. In reality, they do not undercut one another and charge similar fees to insurers and offer the same policy prices.

A spokesman for Biba said there was “some competition” but “in general they all charge similar amounts, so I’m sure each knows what the others charge”.

Price comparison websites argue that they are the cheapest and best way to buy cover despite these commissions, as they let customers find the best policy quickly.

A spokesman for GoCompare defended the commissions and said comparison websites provided a level playing field for all insurers and brokers. He said: “This is good for consumers, who have more choice and whose business is competed for more vigorously, good for insurers, which can manage their budgets according to the quantity and type of customers they want, and good for us, as we can continue to invest in innovation to remain the best way for people to find, compare and buy insurance.”

Simon McCulloch of Compare the Market said: “[Price comparison websites] have brought competition, transparency and choice to the insurance market.” A study by Warwick University in 2015 found that price comparison websites’ fees “place upward pressure on prices” and that “the net effect is that prices increase for all consumers, who would be better off without the site”.

If car insurance buyers check more than one price comparison website they are more likely to find a more competitive quote.

A spokesman for Confused.com said: “It is not in our interest to inflate insurance premiums and we work extremely hard to get the most competitive prices for our customers.”

MoneySuperMarket had not replied to requests for comment at the time of going to press.

Little-known fees can bump up costs for drivers because insurers are unable to sell cheaper deals directly, finds Sam Barker £160 The highest commission charged by price comparison websites on a motor insurance policy