You’ve probably used comparison sites before. They compare everything from travel insurance to phone plans, home loans to hotels. You name it and there’s a decent chance there’s a site out there comparing it.
These sites claim to scour the market in search of the best deals while you sit back and let the algorithm do the legwork. It’s a tantalising prospect – who doesn’t like doing less work and getting a great deal? And so, every month, millions of Australians make use of these sites. But is it too good to be true?
According to this report by consumer watchdogs the ACCC: Yeah, it is.
“The ACCC has identified a number of areas where conduct by comparator website operators can potentially mislead or deceive consumers,” says the report. “Lack of transparency is a key issue of concern in terms of both material on the website and behind-the-scenes.”
In 2017, CHOICE found that comparison sites like Compare the Market charged “25% of the first year premium and 6% of the second year premium of health insurance products sold on their site”.
According to Bupa, comparison sites “claim as much as 40% of the first year’s premium as their commission for informing people of their choice.”
So who’s paying for this 40% mark-up? The consumer, in the form of higher premiums.
“This fee doesn’t go to buying health services for anyone; it is taken off the table, must be absorbed somewhere and leads to higher premiums for everyone in the long run,” Bupa adds.
This is where I’m conflicted. I tend to believe stats and figures. I try not to marry myself to any ideology. But I also really dig meerkats. So if a charismatic Russian meerkat on the television screen is telling me he knows the way to the best deals, I’m inclined to believe him. Hell, I’ve been using comparison sites for years. I never really questioned it; I sincerely believed they did the legwork and found the best deal for me.
If you, like me, have succumbed to these charms, you’re not alone. According to research from Roy Morgan, “over 3 million Australians visit a comparison website in an average four weeks, equivalent to almost 15% of Australians aged 14 and up.”
A new competitor joining the market is Kyco, an Aussie business “dedicated to fixing a broken services system by negotiating better deals for households to solve the problem of rising bill costs”. They’re also hellbent on dispelling the myth of comparison sites offering genuine savings.
According to their founder and CEO Trond Smith, “while one-third of the market use comparasites to switch providers, many more use these sites for research.”
That’s not a typo, Trond likes to refer to comparison sites as comparasites. Clever, I guess.
“However, this is where it gets tricky,” he adds. “Consumers may think they’re getting a broad overview of what’s available, but in reality, these sites often only show deals from participating suppliers and preference those that pay the highest commissions, not provide the best deals.”
According to CHOICE, with both Finder and Canstar you have to first find and disable the show “only participating health funds” check box to gain access to all health funds rather than just participating suppliers.
According to Trond, the biggest issue with comparison sites, is not only that do they often don’t save people money in the long run, but they actively add cost into the system. Firstly, by charging huge commissions, and secondly, by encouraging customers to churn and change providers which leads to more hefty commissions for them.
“Let’s look at the example of a consumer who takes out car insurance with a comparison site that takes 30 per cent commission,” says Trond. “Say that insurance costs $1000 per annum and they switch insurers each year for the next two years because the comparison site contacts them with a better offer. Over three years, that’s $900 in commission plus a new introductory discount offer each year to acquire the consumer. The suppliers need to account for this cost in their pricing, so their bills start to creep up.”
So what’s the alternative? Well, Trond believes he’s created it with Kyco, as thanks to their group buying power, they’re able “to secure better deals and ongoing financial savings for everyday Australians across a range of services and industries”.
Basically, the more members who sign up to Kyco’s community, “the better savings we can negotiate with providers and the more deals we can offer everyday Aussies, from energy and insurance to groceries and fuel”.
Kyco claims to do the hard work for the consumer. “We research all the suppliers and providers in any given industry before negotiating with one to lock in a great deal for you. Bringing thousands of potential customers to them means they don’t have to spend money to go out and find them.”
“The money they save on advertising and promotion can be passed on to our members by offering them an amazing deal. Essentially, more members means more savings.”
Of course, as with all things of this nature, do your research before committing your money to anything – don’t just jump in blind like I once did.
And whatever you do, never trust meerkats.
Originally published article in Vice