Why promises of lowest rates don’t always deliver

Most consumers think unregulated intermediaries such as InsuranceHotline.com always offer the lowest rates going, but that’s not always the case

David Waserman has been an insurance broker for 17 years – long enough that he could usually eyeball a consumer’s information and know roughly how much they were going to have to pay for auto insurance.

So when he started paying close attention to InsuranceHotline.com, he was confused. The site touts itself to consumers in advertising as: “Your search engine for the lowest insurance rates."

But he knew this wasn’t the case.

Insurance Hotline claims to find the lowest rate on offer from its large network of insurance professionals by having consumers spend 10 minutes filling out forms, then running it through a database of more than 30 insurers. Brokers pay the site for links to prospective customers, which are called “leads."

But after Mr. Waserman joined the service, something didn’t seem right.

“I saw some leads come in where something looked really out of whack," Mr. Waserman said. He was being sent leads, or potential customers, who he knew could get a cheaper rate elsewhere, from insurance companies that he didn’t happen to deal with.

“You, the consumer, enter all your information. You’re told $6,000 is the lowest price. They give you three [quotes], allegedly the three lowest," Mr. Waserman said. “But when I enter it on my system, I see that there’s at least one quote for $4,000 out there for you." But he hadn’t merely stumbled on a glitch in the website. What he had unknowingly uncovered is another crack that is opening up in the regulatory oversight of Canada’s insurance distribution system. InsuranceHotline.com is not a broker, nor an insurer, and is therefore not subject to scrutiny from the provincial authorities who preside over the insurance industry. Consumers who trust that the site is giving them the lowest rate may be disappointed, and may end up paying more for insurance than they have to, Mr. Waserman said. “If it’s your first insurance [policy], you’re probably more likely to be susceptible to that," he said.

Quotes and other insurance coverage information provided to consumers by unregulated and unlicensed intermediaries is beyond the reach of regulators.

Perplexed, Mr. Waserman started doing some research. Of all the leads that he received from the website in the month of June, as a sample, he figures that one in four were not giving the consumer the lowest price they could possibly receive.

Frustrated, Mr. Waserman refused to pay for leads where his price wasn’t the lowest, and he put in calls to Ontario’s insurance watchdogs. The leads, he felt, were no good to him because the consumer would quickly realize they could get a better price elsewhere and would become frustrated with him.

Regulators looked at the matter and said because the website isn’t providing “binding" quotes, it’s not actually selling insurance, it’s just linking buyer and seller – despite its advertising claims to the consumer about offering the lowest price in the market.