How do comparison websites make money?

In recent years, insurance comparison websites have become increasingly popular. From iSelect, to Canstar, to the latest entry Compare the Market, Australians are now more than ever turning to these sites to get a better deal on their health, home and car insurance.

But, how do these sites make their money? Are they paid fees or commissions by the insurers they recommend? And, most importantly, are any of these costs passed onto you, the customer? In this article, we will take a look at three of the top comparison websites to determine how they make money.

How does Canstar make money?

Canstar is one of Australia's most popular comparison sites. Its star rating system is trusted by consumers and industry professionals alike. Its data is cited in research by private organisations and government bodies. It's also one of the longest standing comparison websites, with a more than 20-year history in Australia.

Canstar is different to other comparison sites in that it makes its money in four ways.

1. database subscriptions: banks pay for access to Canstar's databases. they do this in order to monitor the prices and offers of competitors and to ensure that their own products are competitive within the marketplace. In this way, they can keep an eye on competitor activity, without having to source extensive data themselves.

2. ratings licensing: should a product or institution receive a canstar 5-star rating, the owning party can apply for a licence to use that rating along with the Canstar name in their marketing material. as the Canstar rating is trusted by many Australians, this licence can be of significant value to purchasers.

3. website advertising: Canstar, like most websites, also features traditional advertising. this includes 'banner ads' and 'mrec ads', which are the square and rectangle ads you sometimes see at the top or side of webpages.

4. lead referrals: Canstar's website states that 'on our tables of data and also on some advertising we provide links to third party sites' and 'we may receive payment for these referrals.' therefore, should you choose an insurance provider via Canstar, Canstar may receive payment for referring you to that provider.

On their website, Canstar states that they take their research very seriously and that financial arrangements do not affect their recommendations.

You can read more about Canstar's policies regarding payments on their website under about canstar and how we get paid.

How does compare the market make money?

You may recognise compare the market (CTM) from their humorous 'compare the meerkat' TV advertisements. They're a relatively new entry to the Australian market (arriving in 2012), however, they've been providing online insurance comparisons in the UK for 10 years. They compare quotes from car, home, health insurers and more.

Compare the market make money by way of commissions and fees.

Should you purchase a product or service via CTM, CTM may receive a commission or fee from the relevant service provider. CTM state on their website that 'this commission is paid by the product or service providers' and 'there is no extra cost to you for our service'. In other words, the provider pays the commission, not the consumer.

So how much are these fees?

CTM say in their financial services guide that they may receive a fee or commission for each product issued in respect of, or attributable to, the financial service provided. According to the aforementioned guide, those fees are as follows.

Product	compare the market fee
car insurance	up to $250 (plus GST) from the relevant provider
home & contents insurance	up to $200 (plus GST) or up to 20% of the home & contents insurance product premium (including any fees or government taxes and charges) (plus GST), depending on the product, from the relevant provider

CTM's financial services guide also notes that auto & general services (AGS) may also earn a fee if you purchase from AGS brands. AGS brands include budget direct, Australia post car insurance and virgin money.

The above fees and commissions are included in the cost of the product. For more information, including details relating to AGS commissions, read compare the market's financial services guide.

How does iSelect make money?

Launched in 2000 by Australian online entrepreneur Damien Waller, iSelect is one of Australia's most recognisable and widely used comparison sites. iSelect compares a wide range of insurance products from a variety of providers. Their service includes but is not limited to comparisons of car, home and health insurance.

iSelect makes money from commissions

according to their financial services guide, iselect receives commissions (and, in some cases, a marketing services fee) from participating general insurers.

The guide says that 'all of these fees are paid by the relevant insurer and are not an additional cost to you.' this, as with Canstar and compare the market, means that the service provider pays the commission, not the customer.

Commissions on car insurance

iSelect's financial services guide states that iSelect receives a commission:

"Up to 45% of the first year’s (gross) premium for each car insurance products that we refer or sell, or up to $450 for each car insurance product that we refer or sell.

In some cases, an ongoing trail commission of up to $400 for each year you that you renew your car insurance policy originally purchased through us (with such trail commission payable to us for up to two annual renewals)."

commissions on home and contents insurance

iSelect's financial services guide states the following in regard to home and contents insurance.

"with respect to home and contents insurance products which have been purchased by you from an insurer where you have initially been referred to that insurer by iSelect (whether via our website or by us transferring your call through to that insurer) we will receive a commission of up to 25% of the first year’s (net) premium for the relevant home and contents insurance product sold."

For more information, you can read iSelect's financial services guide.

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