Direct Line v Confused: The War of the Machines

Direct Line versus Confused

Three hundred aggregators started paying attention on June 4th 2007. The survivors of the broker battle called the war Judgement Day. They lived only to a face a new nightmare, the war against the direct insurers.

On the day in question, Direct Line began an above-the-line advertising campaign specifically set up to slam price comparison websites. In a bold move, Direct Line (who refuse to appear on price comparison or aggregator websites) decided to go on the attack. Not a great surprise considering how the brand launched into the personal insurance market.

Direct Line have cast doubt on the independence and transparency of insurance comparison sites by saying:

…price comparison sites are middlemen…

…additional benefits are only available direct…

Confused called it:.

“an act of desperation”
“Direct Line’s claims simply don’t stand up to scrutiny”
“…Direct Line doesn’t even make the top ten”

Not surprises that these two brands have come head to head – RBS versus Admiral. However, in one corner of the RBS group we have Direct Line attacking price comparison whilst on the other side of the family we have Tesco planning to build their own aggregation tool.

Is this right for the industry, are we going to see fatalities? Is this right for the customer? Surely, they’ll be left confused (excuse the pun) by all of this. Some mistakenly thought that the price comparison sites actually compared the whole insurance market. Others will believe every word coming from Direct Line’s dirty little mouths.

Aggregators have started appearing almost every week in the last few months – eager to get on to the Billion valuations bandwagon. We at Insiders View believe there is a place for aggregators in the market. However, clarity and independence is vital to provide the best service for customers. They, at the moment, are likely to be confused by the intricacies of parent companies such as Confused (Admiral owned) or CompareTheMarket (Budget owned). Recent advertising will only add to this confusion.

The waters are only going to get muddier. Tesco (RBS), Norwich Union (Aviva) and Saga have all been linked with moves into the comparison sector. We’re sure there are other debating it. Surely they’ll make customers aware of their affiliations …will they ****! And what if an insurance giant buys their way into the insurance comparison market and takes over an established brand? Are they going to be clear with the comparison customers that the shop is under new ownership and the products that are actually best for them are on the top shelf, just out of sight?

So, who’s going to be our knight in shining armour? Who’s going to stand up against these insurance giants and put a stop to this marketing, image manipulation and spin? If it’s going to be an insurance company, they’d better make themselves nothing less than 110% transparent.

Now’s the time for ill informed and persuadable journalists to be put in their place …what does the insurance sector think about this move? Let’s hear it direct from the insurance world – cut out the middle man journos!!!

{ 22 comments }

Ernest June 14, 2007 at 5:59 pm

Insurance Times has commented that Esure have granted a £30m marketing loan to GoCompare (to be converted into shares if loan cannot be repaid)! There goes another one.

Hayley (who we know reads Insiders View!) has commented in the press: “The last thing I would give up is our independence”. A bit close to the line though, wouldn’t you say?

First Central is the latest name to come into the market. Looks like they’ll be similar to CompareTheMarket as most of the products on their panel will come from Guardian Holdings (their parent company) brands Zenith and Link.

So, who’s left standing now? MoneySupermarket (about to float and not the most ethical). Insurancewide (hanging in there for the time being). Anyone else? Does anyone know much about the ownership of people like QuoteZone, TheIdol etc?

Thomas Adalbert June 15, 2007 at 10:28 am

The consumer will decide! They usually buy on price anyway.

Hayley Parsons June 15, 2007 at 1:32 pm

Just to set the record straight, gocompare.com is controlled and managed by me and the team at gocompare.com, I am the majority share holder and the remaining staff are also share holders. The main reason for setting up gocompare.com was that I wanted full control of my own business – yes I like to do things my way and I won’t compromise on that!

Once we launched gocompare.com we had a huge amount of interest from insurers and VCs who all wanted to buy the business or invest. I made the decision in December last year that in order to really grow the business and compete with the big players then we needed to take out a loan to fund the business and that is exactly what I did. I took out a loan and if payment can’t be made back for the loan then part of the shares can be converted into equity. Even in those circumstances control of the business remains with me at all times and I’m not willing to compromise on this. So yes gocompare.com is completely independent and completely controlled by me and the gocompare.com team. If we do end up releasing some shares in the future to non staff members then it will be worth it for the trust invested in us for such large sums of money.

We set up and fully launched gocompare.com before finding our loan provider. In the early days of working on the build of gocompare.com the launch team took a big risk in giving up good jobs and we all took that risk because we wanted to do things our way and do them better … We are not about to give that up.

Best wishes

Hayley

Hayley Parsons
Founder
Gocompare.com

Ernest June 15, 2007 at 5:10 pm

Great PR Hayley!

I must say, Insiders View do appreciate a lot of the good practice and ethical measures which GoCompare do for the customer. However, is that not a little weaker now that you’re in the pocket of a major insurance provider?

RBS (Tesco), Admiral (Confused), Budget (CompareTheMarket), HBOS/Esure (GoCompare). Seems like a very strategical entrance into the aggregation market. What’s next? Aviva or AXA buy up MoneySupermarket and Insurancewide??!!

Do you really think you can stay impartial with £30m hanging around your neck? One of the USPs on your homepage is that you’re offering an independent comparison. You have to live up to that – and I hope you do. It just puts you in a very difficult position, does it not?

I think I know your answer to this but …do you think it will ever make you do something which you wouldn’t do if Esure were not involved?

Hayley Parsons June 15, 2007 at 6:03 pm

Hi Ernest

I absolutely 100% guarantee you that I will not do anything any different now that I have a loan in place with Esure services. Esure sit on our panel of insurers but they also sit on Confused and MSM.

I will absolutely stay impartial. I very easily could have taken an easy way out, handed over control of the business and made myself a nice bundle of cash but that’s not what drives me. I do genuinely want to change the way comparison services work and we very much offer a transparent service. We offer full prices so it’s not possible to tweak the rates to ensure a preferential partner is selected – and even if it was possible, it’s not something I would entertain for one minute and our loan partners feel exactly the same way.

I’m 100% confident that all the insurers that dealt with me through my “confused” days and now through my Gocompare.com days understands how important control and independence is to me ….. It’s what drove Gocompare.com in the first place and I don’t sell out that easily!

Keep believing in us Ernest, we won’t let you down I promise.

Kindest regards

Hayley

Ernest June 15, 2007 at 10:47 pm

Haha! I’m sure you won’t!!

I was about to say that the customers won’t know how genuine or not you may be. Having said that, they haven’t got a clue that the 90% of the industry boils down to about 4 or 5 companies!

So …while we have your attention …what are you thoughts on the Admiral/Confused versus RBS/DirectLine war? Floating/sales politics? Good for the customer? Do you think they’ll listen to Direct Line?

Hayley Parsons June 17, 2007 at 8:59 am

I’m delighted that Direct Line has decided to attack the aggregator marketplace – it has provided an excellent vehicle for aggregators to show exactly why 69% of online shoppers use a comparison or aggregator site in their search for a motor or home insurance policy, according to recent figures from user experience company, Foolproof.

Direct Line says that price comparison sites are not providing customers with the features that they may require from an insurance policy. Interestingly, one benefit that a standard Direct Line motor insurance policy currently does not provide its customers is a free courtesy car if the policyholder’s vehicle is in need of repair!

In addition, another feature communicated extensively in Direct Line advertisements is that customers do not have to pay an excess if the insured is hit by an uninsured driver. However, to be able to claim under this feature of the policy, a customer would need to provide the vehicle registration number, the make and model of the car, and the driver’s details – not very useful if you have been hit whilst stationary and have no way of proving that the vehicle was uninsured.

Another benefit mentioned in Direct Line’s own advertisements; namely the discount if you insure a second vehicle with the insurer, is currently available from a wide number of insurers.

I’m still not sure why Direct Line would waste so much money in raising the profile of comparison sites, maybe it’s a genius marketing ploy on their behalf given that Tescocompare.com is very close to launch which will host a good range of RBS brands. The Direct Line brand might not appear directly but I’m sure all the RBS groups other brands will all appear.

Direct Line changed the way in which consumers purchased insurance when they launched in 1985 but that was over 20 years ago! Things move on and price comparison services are now fundamentally changing the way in which consumers search and purchase insurance.

I was thinking that maybe our next TV ad should say something along the lines of “what’s a good deal on car insurance” “When I put my details into the gocompare.com website and I find out Direct Line have been charging me five times as much as every other company out there for something that, when I have an accident, I’ll try my best to avoid using anyway for fear of not getting a courtesy car and seeing next year’s premium double” or maybe we’ll just start a campaign that states we beat Direct Line prices in 9 out of 10 prices.

Greg Wilson June 25, 2007 at 9:58 am

To answer part of the question above : “Does anyone know much about the ownership of people like QuoteZone, TheIdol etc?”

I am the founder of Quotezone. We are a self funded, independently owned aggregator site.

Like other aggregators , we make a small commission each time someone buys an insurance policy as a result of using our website.

Following on from the points above, I find it interesting how some large corporates can question the ethics of the aggregator model by calling them middle men, when they themselves run affiliate programs where they pay webmasters a commission on referred sales. I find it quite hard to distinguish between the two practices from a “moral” point of view, though, if anything, the aggregator model is the most ethical of all as it benefits the consumer most at the end of the day.

Ernest June 25, 2007 at 1:07 pm

@Greg

Is commission paid when someone “buys” a policy or when someone “clicks to buy” a policy.

Ethically speaking, one could argue there’s a difference there. This is something I thought GoCompare may have set up but I’ve heard of a few insurers who pay on the click for some products. I don’t know of anyone who gains commission purely on the sale …other than quidco and their equivalents.

So, what are the plans for QuoteZone. GoCompare have taken in £30m. CompareTheMarket are splashing £20m. Confused and MoneySupermarket are already spending like they’re floating tomorrow (!). How are QuotEzone going to be able to compete with this?

Kevin June 27, 2007 at 9:51 am

@Ernest

At Gocompare.com we charge our partners only when a quote form our site results in a car insurance policy being sold (cost per sale).

I am interested in the ‘ethical difference’ that you mention between the cost per sale and cost per click models and your concerns between the two charging methods.

Creased June 27, 2007 at 1:57 pm

Is it just me or has MS been down for about 90 minutes?

Tron June 27, 2007 at 5:11 pm

@Creased – No, not just you. Rumour has it server rooms have been flooded.

Ernest June 28, 2007 at 6:04 pm

@Kevin

The ethical trade off is where the incentives rest for the comparison site. If they use a cost per sale model, they have an incentive to deliver good results to the customer and the insurer. If they operate on a CPC basis, they’re actually rewarded for confusing (excuse the pun) the customer.

With a CPC model, the more times the customer clicks and finds an inaccurate price match between the two sites …or a high excess …or a policy exclusion based on a question which the comparison site didn’t ask …or a price change from the correction of a crucial pre-populated field …the more revenue it generates.

Surely rewarding the comparison site for the sales delivered (as I thought you guys worked) is best for every single party involved?

Why do you think most of these comparison site use the CPC method? Is it because of the selfish reasons suggested above? Or are there other considerations? Would be interested to get your view as an aggregator.

Kevin June 29, 2007 at 10:58 am

@Ernest

I totally agree that CPC is open to more abuse and that the CPS model (that we use) helps to ensure that customer focus is maintained. However, the problem for all aggregators is ensuring that they get paid for those sales resulting from aggregator quotes.

Quote: ‘Surely rewarding the comparison site for the sales delivered (as I thought you guys worked) is best for every single party involved?’

I did some work recently that showed a very high proportion of sales resulting from aggregator quotes were not being attributed to the aggregators and therefore the aggregators were not being paid for the sales.

If you assume that ensuring the customer gests the same price on both the aggregator and insurer site is a prerequisite (as we do), then the pressure is on the aggregator to ensure that they get paid for any resulting sales, whether that be from a CPS model or CPC model.

I stress that I am a keen advocate of the CPS model and strongly believe that it is the business model that delivers a win, win, win scenario for Customer, Insurer and Aggregator, but I would not condemn those ethically using the CPC model.

Ernest June 30, 2007 at 10:28 am

@Kevin

No excuse!

Surely you could place a 1px tracking gif on the insurers buying confirmation page a stipulation of being on the aggregator system.

Next…

Greg Wilson July 2, 2007 at 4:14 pm

@Ernest

We at quotezone use a pay per sale policy. However, its not as simple as putting a 1px pixel on a website as not all business is completed online. Many users do like to finish a sale by calling a broker and sometimes there can be a missed tracking opportunity due to this and how well the broker has their systems set up to track.

So I would have to say I agree with what Kevin has posted. Although we at quotezone charge per policy sold, it still comes out of the case acquisition budget for the broker. If they are paying a sensible cost per click, then overall the budget should work out to be roughly the same for them regardless of which of the two pricing models they use.

Ernest July 2, 2007 at 6:23 pm

@Greg

Fair comment. So, are you saying that QZ let the broker choose their pricing model? For those working from the cost per sale version, how can you be sure that they’ll tell you the truth??!! If I were an insurer on your system, I’d be tempted to not report the odd sale here and there ;)

Greg Wilson July 3, 2007 at 10:30 am

@Ernest

At present, we have a standard pricing model of cost per sale. We realise that there is the opportunity for insurers not to correctly report sales back, however, we do run analyses to estimate predicted sales for brokers on our panel based on their pricing and use that as a yard stick to measure their performance and tracking accuracy.

We have a good relationship with the brokers on our panel and while there can still be some sales that “slip through the tracking net”, we have found in the majority of cases that they have been more than helpful in resolving any tracking issues which have arisen.

Ernest July 3, 2007 at 6:55 pm

@Greg

You just need to select your brokers carefully ;)

@Kevin/Hayley

What about yourselves? What proportion of providers are on CPC or CPS? How do you guys keep on top of it? Surely with the expected influx of aggregators to the market (most of which will probably opt for CPC), the CPS guys will get left behind.

Hayley Parsons July 4, 2007 at 11:05 am

Hi Ernest

All our partners pay CPS and we do exactly the same as QuoteZone with regards to monitoring sales. Our insurance partners also send us monthly quote data and we randomly ask customers who they purchased from and verify this against the partners data.

Until now, insurers have had no option but to pay what the bigger players demand but I think this is starting to change. Certainly insurers are not happy with the new Confused.com payment structure some will have no option but to suffer it for a while but what will they do, maybe increase the cost of insurance to the customer for policies quoted through that distribution channel?

I know a few new players who have tried implementing the CPC model but have not been successful. I prefer a transparent business model than one which favors insurers that pay the most money or even worse, one which gives much cheaper rates to the big brands as aggregators need them on board and then charge much higher rates to the partners that have no option but to pay whatever ridiculous fees are demanded.

I don’t think the CPS guys will be left behind. I think (hope!) we’ll have more partners on board, better rates and stronger relationships …. But maybe that’s me looking through my rose coloured spectacles!

Ernest July 4, 2007 at 1:51 pm

@Hayley

…and of course the CPS rates which each insurer pays will be absolutely identical? Otherwise, you wouldn’t be able to criticise the CPC guys for favouring the guys who pay the most money. Same principle really.

Intersting to hear that you speak to customers to verify whether they’ve purchased a policy or not? Surely that’s very inefficient. sorry, but I don’t believe this one liner! ;)

Knowing quite a few of the insurance IT systems quite well, nobody I’ve spoken to has managed to give me a solid reason not to implement a neutral, third party tracking system between the insurers and aggregators?

The only reason I can think of is that they’d suddenly be reporting a few more sales than they used to!!

Daniel July 25, 2007 at 6:54 pm

Hi, just saw your comments on davidnaylor.co.uk so thought I’d come and check out the insiders-view. You’ve certainly had some interesting debates from what I’ve seen (will have to make time for a more detailed read).

As you say crazy funny stuff with these adverts, and people say insurance is boring!

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