Why compare? The role of the aggregator

The Bank of England has warned families will face the biggest fall in living standards in the last three decades as energy costs spiral, interest rates soar and the cost of living stretches even further. It’s not just the big squeeze, it’s the greatest squeeze we’ve seen in decades.?

We’re in a period of survival. Consumers will have significantly less disposable income than they have ever had. At the same time, brands are still recovering post-pandemic, figuring out the new consumer landscape and are now grappling with sky high business costs that they won’t be able to pass on to consumers.?

Usually this type of squeeze would mean consumers shop around, using price comparison sites to get the best deal.? But soaring energy prices and new regulations on insurance sales mean sites such as GoCompare and MoneySupermarket have little to compare.?

So what’s the future of aggregators??

We’re breaking down the topic starting with how the aggregator market has changed since the start of the year.

On 1 April energy prices leapt by 54% when the market price cap, set by the regulator, Ofgem, was increased to take account of higher wholesale costs in recent months. At a time when consumers are counting every penny, aggregators have found themselves without any deals to offer on energy.?

Usually online price comparison sites earn commision from companies when customers switch - thought to be around ￡30 for energy contracts and ￡40-50 for insurance policies. With no deals to offer it’s fair to say aggregators are having a tough time. MoneySupermarket recently announced their profits have fallen to their lowest level in eight years with a fall in home services, which includes energy switching, and reducing visitor numbers on car and home insurance. With others similarly affected: GoCompare paused the energy strand of their service after a ‘year like no other’ and at a time when consumers didn’t know whether to switch or stick, USwitch told customers to stay put and not use their service until further notice.

On top of this, rising interest rates also spell bad news for new deals on loans and mortgages. And the comparison sites also face the challenge of new FCA regulatory changes to protect home and motor insurance customers from loyalty penalties. From 1 January, anyone renewing their policy with an existing insurer should pay no more than they would as a new customer.?

“This has changed the nature of the volume of customers searching.” Said Adam Beckett, Chief Distribution Officer at Ageas:

“Since prices for those who stay put have equalised and the renewal price has been keener than in previous years, the inclination for consumers to search? hasn’t been strong. Since January the absolute number of quotes year on year is down and there hasn’t been as much traffic to aggregator sites.”?

What's next for price comparison sites?

Consumers are still using price comparison websites. They’re a tool ingrained into the heart of many people’s buying decisions. So what’s next:

• Evolve and ride out the rough patch. The challenge for aggregators is to reposition themselves and think of ways to help consumers buy time and focus on other areas where we can shop around and save money - like travel and broadband. With more people working from home post-pandemic and people desperate to travel after a hiatus, both areas are set to big money makers for price comparison sites.?
• Incentives: Aggregators have a unique position under the regulation where they can offer incentives. This isn't new, they’ve always offered incentives, but now they’re using them more effectively.? A few are offering supermarket vouchers and offers that are appealing to customers at a time when eating or heating is a real question for many families.? Equally, aggregators are making stronger links back to the purchase product - MoneySuperMarket, for example, offers customers vouchers when you buy car insurance to put towards your MOT.
• Pivoting the proposition: “Aggregators need to focus on the proposition they are offering to customers whether that’s offer and incentive led, or service and experience based.” says Adam Beckett, Ageas:

“Nothing is settled post regulation changes. Over time if you get equalisation of new business and renewal premiums, will there be an inclination for customers to search in future? There’s a chance that they will have to work with smaller volume and be more intelligent with the relationship they build over time.”

One thing is clear. Price comparison sites are here to stay and will continue to be the destination for consumers, they will just need to work harder, pivot their offering and be clever about the value they can offer back.

Would love to know your views. Drop me a line on Linkedin or email [email protected].

If you want to know more about Magnetic and how we're designing better futures - check out our Impact Report and sign up for our?monthly newsletter.