Why Insurance Comparison Sites Don't Include Every Single Provider

If you're using a site to compare different insurance options, you'd want the broadest range of possible options — but that doesn't mean that comparison sites actually aim to include every single deal on the market. Here's why (and why people still often use the phone when choosing a health insurer).

Picture by Morne De Klerk/Getty Images

Obviously, one reason is that some insurance providers choose not to work with comparison sites in the first place. However, according to David Rees, managing director for insurance comparison site Choosi, offering too many options makes it harder for consumers to actually get the right fit.

"If you give people too much choice, then they get 'analysis paralysis' and they can't choose," he told Lifehacker. "There's something like 40 health funds out there, for instance. If you had them all on the books, it would hurt you in getting that decision made. We're always looking for that happy balance and we've got a good choice of funds."

"It's a very complicated purchase There's a lot of elements and a lot of different ways to present it. Funds can use different names for the same product as well."

Fund willingness to be listed is also a factor, though Rees said there was a broad recognition that being on comparison sites now needed to be part of the marketing strategy. "All funds recognise that comparison sites are firmly on the map. Some have dived in and see it as key; other funds dip in and out."

Rees said demand for health insurance rose rapidly in the run-up to the end of the financial year, especially because of new rules where people had to nominate an appropriate income tier for their fund to calculate what level of tax rebate they would receive.. "From an industry perspective, year-on year there's been a huge spike and it would be 100% on the back of the new tier system. It's has generated a lot of inquiries."

Broadly speaking, if you earn more than $84,000 a year as an individual, then taking up health insurance is cheaper than paying the higher Medicare levy you'll face otherwise. "For us, it was a challenge to take that change and work out how to present it to the consumer," Rees said. "Across the funds everyone has taken a simple approach. The majority of people aren't going to be massively affected because of the thresholds."

While you can compare funds in detail on sites such as Choosi, Rees said most customers still ended up phoning the site before making a decision. "The majority of people still need to talk to someone We have spent a lot of time and effort on the site and trying to tackle the complex presentation, but the majority of people still find that a bit overwhelming. That underlines that it is a confusing purchase and there's more work to be done."

So should you automatically go for the cheapest option? "Price is one thing, but it's the benefits you are getting that are crucial. If you're a frequent claimer, then annual limits are what you need to focus on. For your every-now-and-again claimer, big benefits are important. People have to understand how they're going to use the product. It makes a big difference, You can have identically priced premiums but those details are needed."

Rees also advises against simply working out what your tax liability would be without insurance and spending a similar amount. "The temptation is to supplement your health insurance with a similar value percentage. Substituting health insurance for tax is a great thing to do, but you shouldn't just go for a like-for-like swap. Find a product that's going to work for you."

Lifehacker's weekly Loaded column looks at better ways to manage (and stop worrying about) your money.


Comments

    1. The reason is that only some Health Funds are participating, is that have to pay commission to the comparison sites to be officially included to be selected. As well as commission on each 'sale' for up to 12 months.

    2. The participation contracts can include clauses that state they must get X numbers of members for a particular fund. So they could be selling you bad deals, just to get the numbers up for a given fund.

    Hence The cheap funds by definition are not participating, so you are better of ringing around.

      Agree with @black.

      Commissions on iSelect are around $750, I've heard. That is a HUGE cost for insurers, and can represent the first year or two of premiums. I wouldn't want to use a service like this because they are obviously only selecting companies that have to cost in this huge acquisition expenses - making my premiums higher. It feels like this article is trying to justify Choosi's limited selection. Maybe I'm cynical, but I think their limited range is much more driven by their commission structure.

      Another reason comparison websites might limit their range is because of restrictions on their AFSL or ACL license. They need to maintain an Approved Product List, and need to be comfortable with the product quality of all products on that list. This has been an issue for us with regard to Superannuation comparison.

      (Disclosure: I'm the founder of a comparison website Prosple, but we don't compare insurance.)

      Last edited 02/10/12 1:10 pm

    You missed the main reason that not all providers are listed: COMMISSIONS - the comparison site will obviously promote those providers that are paying the highest commissions!

      Evidence? Commission levels are quite standardised in many of these industries (eg mortgages).

        There was a 7:30 report into iSelect. Transcript here:
        http://www.abc.net.au/7.30/content/2010/s2861766.htm

        It's well worth the read:

        "JONATHAN CRABTREE: They came to me after I caught them hiding our covers from the public and said that unless I paid them $750 upfront per cover ... they weren't gonna sell our covers and they were gonna keep hiding them from the public."

        Last edited 02/10/12 2:36 pm

    It's not that commission rates vary from product to product, but that some companies will have paid a fee to have their products "promoted" above others, much like Google Ads appear above search results. It's not always obvious that this is happening.

    Angus, this really looks like an advertorial for Choosi. As is noted above, the real reason you don't see the big brands on insurance comparison sites (particularly home and car insurance, but also other insurance too) is because they refuse to have their product intermediated by comparison websites. The problem is is not too much choice - it's too *little* choice - which is why the smaller insurance companies (like Hollard - who own Choosi) make up a whole bunch of other brands to create the illusion of choice and competition.

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