ASIC today warned operators of insurance and credit comparison websites of the need to ensure they comply with their obligations under consumer protection laws.
In light of the growth in comparison websites, ASIC is focused on ensuring they are providing accurate information and not misleading consumers. While comparison websites can play a valuable role and assist consumers in shopping around, one with misleading or inaccurate information can also cause detriment by steering consumers towards unsuitable or more expensive products.
ASIC has already identified a number of concerns with some comparison websites, including that some of the websites:
only compare a limited number of brands/products from a limited number of providers. This may not be clearly disclosed which creates the impression that the extent of comparison is much broader than it actually is
use ‘ratings’ and ‘rankings’ for products without a clear explanation of the basis for those ratings and rankings
refer to ‘special offers’ and ‘featured products’ without properly explaining the basis of selection of certain products.
ASIC’s focus on insurance specific comparison websites found that on some websites:
there was insufficient disclosure relating to website operators who were related to the issuer of the insurance brands being compared
comparisons were provided on the basis of price without any warning that different products may have different features and levels of coverage, and
the operators of websites are not appropriately licensed or authorised to provide financial services.
ASIC also reminded operators that websites that allow consumers to obtain and/or compare insurance quotes will generally be providing financial services. If so, these operators need to be licensed or be an authorised representative of a licensee.
For credit comparison websites that advertise loan products, it is important that comparison rates are disclosed as required under the National Credit Code. Given the nature of comparison sites it is important that consumers are provided with accurate information so they can choose financial products that best suit their needs.
ASIC Commissioner Peter Kell said, ‘ASIC recognises that consumers can benefit from the increasing opportunities to research and compare financial products online. For this to occur, operators of comparison websites must take care to ensure they accurately portray the features and limitations of the products compared. They also need to ensure that any information they provide, including quotes, is reliable, accurate and up-to-date.’
‘We will be targeting this area of the market and we will take regulatory action where necessary to ensure that operators of financial product comparison websites comply with the law’, Mr Kell said.
ASIC recently released Regulatory Guide 234 Advertising financial products and advice services: Good practice guidance (RG 234) which sets out some guidelines for operators of comparison websites such as:
clearly disclosing the basis of awards or ratings
disclosing any links to the providers of products that are being compared, including commissions, referral fees, payments for inclusion in comparisons and/or payments for ‘featured’ products
including a warning if not all providers are included in the comparison
clearly disclosing advertisements to prevent consumers being misled about the ranking of the product, and
where necessary, including a warning that financial products compared do not compare all features that may be relevant to the consumer.