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The rise of price comparison sites as a sales channel has been phenomenal. As an indicator, Confused.com, one of the leading sites, has seen the number of quotes it generates grow from 0.6 million in 2003 to 13 million in 2007. Such sites are particularly strong in the private motor insurance sector, where Datamonitor estimates that aggregator-instigated sales accounted for around a quarter of all new business sales in 2007.
The growth of such sites has benefited some market participants, such as smaller specialist insurers and brokers with less marketing power, yet many insurers believe that these aggregators have made what was already a competitive market even more so. In addition, there are also concerns that customers sourced through aggregators are less loyal than customers sourced via other channels. Direct insurers, such as Norwich Union Direct, also have to pay charges to a price comparison site, if it acts as a source, whereas they pay no fee when customers deal with their company directly.
It is likely that some of these concerns are behind Norwich Union's decision to withdraw its direct products from such sites. Instead, its direct products will only be available from its website or via its call center. However, along with this move, the insurer has launched a highly innovative new proposition, whereby the price and cover that it offers can be checked against prices and cover from other providers. On the homepage customers will see examples of quotes given by Norwich Union and three prices from a range of competitors, and as they progress through the application process, they will be able to see further competitor prices.
The withdrawal is a bold decision, given that these sites control such a large share of private motor new business sales, but the fact that its new proposition is offered as an alternative to price comparison sites will help to drive sales. In addition, the disintermediation of part of its direct business is likely to lead to better margins on its private motor book, given that it will no longer be paying fees to price comparison sites.
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