Members of the insurance and credit comparison website market have welcomed an announcement from the corporate regulator that it will be keeping a close eye on the growing sector to make sure it complies with all relevant financial laws.
The news also comes as reports suggest price comparison site iSelect is inching closer to a float, months after the company first reported the possibility of trading on the ASX.
The Australian Securities and Investment Commission has identified a number of concerns with comparison sites and in a statement released yesterday it says while the sites can provide a valuable role they can also offer misleading or inaccurate information.
Some of the regulator’s concerns include sites that only offer a limited number of brands or products, which sometimes aren’t clearly disclosed, sites that use ratings and rankings without properly explaining what those are, and sites that refer to special offers and featured products without explaining the process behind choosing them.
ASIC’s statement pointed out that websites which allow consumers to obtain and compare insurance quotes are by definition providing a financial service, and therefore must hold a license.
“For credit comparison websites that advertise loan products, it is important that comparison rates are disclosed as required under the National Credit Code,” it said.
Fred Schebesta, the chief executive and founder of Finder.com.au, told SmartCompany this morning he believes the warning is a good thing – especially for those businesses that are already complying with the relevant laws.
“There are comparison sites not actually revealing whether they are owned by an insurance company, and I’ve got a problem with that,” he said.
“I don’t think it’s doing Australia a service, I think it’s actually doing it a disservice.”
Rohan Gamble, the managing director of Mozo, says the aggregator industry is filled with so-called affiliates, who simply create an aggregator product that only compares their products.
Stamping that out, he says, would be a good move on ASIC’s part.
“This type of announcement makes sure that we do the best we can. We’ve been waiting for this type of thing, and we take the view that we do this seriously, and that everyone else should as well.”
The financial comparison industry has been enjoying several years of growth. As the financial crisis hit, more customers opted to check whether they were getting the best deals on credit cards, or insurance products – the internet makes that type of comparison possible.
Aggregator products have also extended into retail goods, although ASIC is primarily concerned with sites that offer finance and insurance-related comparisons.
iSelect has perhaps been the most successful and well-known of the sites in the financial aggregator market. Earlier this year, the company raised as much as $25 million ahead of a float – which it is expected to announce today.
Even as recently as 2011, valuations of price comparison sites started to rise after iSelect received an investment valuing the company at $300 million.
ASIC commissioner Peter Kell said in a statement that the regulator recognises the benefit of such sites, but that operators “must take care to ensure they accurately portray the features and limitations of the products compared”.
Schebesta says it’s important the regulator stamp out dodgy operators – especially from financial institutions that only offer to compare their own product.
“The intention of what ASIC is doing here is very important, because there are some key challenges out there right now that I don’t think are getting enough attention.”