By 
Up to a third of drivers’ insurance costs go on secret commissions charged by price comparison websites, which can be as much as £160 per policy.
These websites charge insurers to display their policies to consumers. Most insurers have little choice but to pay up, as the majority of car insurance is bought through price checking companies.
The costs are then passed on to drivers through higher insurance prices. These flat fees are typically around £60, but range from £40 to £160.
The average comprehensive motor insurance premium is £485 a year, according to the Association of British Insurers trade body, meaning these commissions make up 8pc to 33pc of a typical driver’s bill.
The exact structure of these fees is a tightly guarded secret. None of the big four price comparison firms – Compare the Market, Confused.com, MoneySuperMarket and GoCompare – would confirm what they charged.
However, the lower fees tend to be paid by the bigger insurers, which have an economy of scale and can negotiate lower rates, according to Gavin Sewell, of Honcho, a car insurance website. “The charges made by price comparison websites are not in the public domain,” he said. “This pricing benefits the mass market at the expense of the smaller players.”
Price comparison websites generally keep clauses in their contracts that ban insurers from selling deals directly for less. This means customers are stuck with premiums which are inflated by the website fees.
In the past, comparison companies also demanded insurers did not sell policies at lower prices through rival websites. However, the Competition & Markets Authority watchdog banned the practice in 2014 for being unfair.
The British Insurance Brokers’ Association (Biba) trade body wants the practice to be banned completely. It said: “In our opinion, this is anti-competitive and results in poorer customer outcomes.”
In theory, price comparison websites can compete with each other to charge insurers cheaper fees and therefore offer customers cheaper motor cover than they would be able to secure on a rival website. In reality, they do not undercut one another and all charge similar fees.
A Biba spokesman said there was “some competition, but in general they all charge similar amounts, so I’m sure they know what each other charges.”
Price comparison websites argue that they are the cheapest and best way to buy cover despite these commissions, as they let customers find the best insurance quickly.
A GoCompare spokesman defended the commission and said comparison websites provided a level playing field for all insurers and brokers. He said: “This is good for consumers, who have more choice and whose business is competed for more vigorously, good for insurers who can manage their budgets according to the quantity and type of customers they want, and good for us as we can continue to invest in innovation to remain the best way for people to find, compare and buy insurance.”
Simon McCulloch, of Compare the Market, said: “[Price comparison websites] have brought competition, transparency and choice to the insurance market.” A 2015 study by Warwick University found that price comparison website fees “place upward pressure on prices” and “the net effect is that prices increase for all consumers, who would be better off without the site”.
If car insurance buyers check more than one price comparison website they are more likely to find a more competitive quote.
A spokesman for Confused.com said: "It is not in our interest to inflate insurance premiums and we work extremely hard to get the most competitive prices for our customers."
A MoneySuperMarket spokesman said: "Insurance companies must invest to attract their customers by advertising or other marketing, or by using a price comparison site. Price comparison is cost effective because a fee is only payable if the insurer wins a customer. It isn’t an extra cost for an insurer, it is part of the marketing budget that would be spent anyway."
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