More ways to save money as comparison websites expand

10:18am Tuesday 19th February 2008

THE average family has lost £1,300 from its disposable income - according to the Centre for Policy Studies think tank - because of stagnating earnings, tax rises, excessive debt, rising interest rates and soaring utility bills.

Even households that once managed comfortably are feeling the squeeze. But Sean Gardner, chief executive of MoneyExpert.

com, thinks some of the lost spending power could be restored with a bit of homework.

By concentrating on five financial basics - home and motor insurance, mortgages, personal loans and credit cards - MoneyExpert.com thinks average households could save £547 a year, including £205 on personal loans and £158 on motor cover.

Few deny the internet brings new transparency to the financial products market. The over-60s rely on online accounts for top savings rates.

But do computers find the best product or merely the cheapest? The focus on price could have sunk Simply Switch, a leading energy price comparison site bought by the Daily Mail group 18 months ago, which boasted of helping consumers to cut £20m a year from their bills.

The site struggled when British Gas (BG), the dominant provider in household energy, kept prices low last year - its wholesale market tracker, launched in July, promised to review customer bills every quarter.

As demand to switch energy suppliers fell, income drained away from energy price comparison sites.

As BG prices soar again, the new owners of Simply Switch pulled the plug.

Karen Darby, one of its founders who took a slice of £16.5m paid upfront for her company, looks an even smarter businesswoman than she did before.

Meanwhile uSwitch.com, Simply's main rival in the energy field which was bought by US owners EW Scripps in March 2006, for £210m, is set to remain among the front runners in the online sector with its range of price comparisons extending into current accounts, personal loans, credit/debit cards, heating cover, home telephone and broadband, digital TV, mobile phones and car insurance.

It could be that the focus of personal finance websites is shifting from energy costs to insurance; nearly 70 per cent of drivers are said to use price comparison sites when they renew their policies.

Moneysupermarket.com, floated on the stock market in July last year with a value of £800m, is the clear market leader, reckoned to attract nearly 45 per cent of all online financial traffic. But a 30 per cent fall in its share price since flotation underlines the cut-throat nature of a fast-changing market place.

Leading rivals include Confused.com, the online operation of car insurer Admiral, which marked its fifth anniversary in 2006 with profits of £23m; Go- Compare, backed with £30m of loans from car insurer esure (part of HBoS); and TescoCompare, a car insurance site launched to some scepticism last September because it listed a small number of suppliers and is backed by Royal Bank of Scotland, which previously criticised online price comparisons of financial products. TescoCompare maintains quality of product is more important than price, and offers product comparison across 25 policy features.

This week, it added four new car insurers - Swinton, Autodirect, Bullseye and AIG Direct - and was voted the cheapest price comparison site for car insurance by independent research agency Consumer Intelligence.

Tesco already earns profits of about £65m from its financial products. If it returns to estate agency this year after a rebuff last year, as many expect, it could have a platform in financial services to worry even moneysupermarket.com Smaller rivals are limbering up in the background: Moneyfacts.co.uk, hitherto seen as largely a trade site for professionals, has joined Switch Wizard to compare gas, electricity, home phone and broadband suppliers - and with BeatThatQuote for home and motor insurance.

The British Insurance Brokers' Association (Biba) questions the move to online providers - based on a sample of 250 consumers, of whom 125 had used a price comparison site, it is calling for insurance websites to be regulated in the same way as insurance intermediaries.

The Government's City watchdog, the Financial Services Authority (FSA), is ready to investigate the online sector. Its remit could look at fees charged for inclusion in online tables, commissions paid for new customers, and online financial advertising.

At independent financial research company Defaqto, head of insight Brian Brown believes it's time for a closer look at the online provision of some financial products.

"Certain issues on insurance sales should be clarified," he says. "People are not always clear about the role of an online intermediary, about who sorts out problems if there are difficulties later with a policy.

"Consumers may find their policy is not the one they were sold - or they might not realise the features left out of a policy to produce an acceptable price until they claim. For example, online providers might overlook where a car is kept at night, while an insurer refuses to pay out if it is not in a garage or on the drive.

"Consumers have to realise that motor and home insurance products are not all the same," said Mr Brown. But it is easy to forget this as online providers make it so easy to find the cheapest deal.