Under fire: ASIC allegations rock Choosi

When Australian shoppers used Choosi to compare life and funeral insurance, they thought they were choosing between products from leading insurers.

But according to the corporate watchdog, they were really picking between policies underwritten by a single provider.

The allegations go to the heart of the inherent conflict baked into the business model of many free comparison sites - they earn money from the very products they recommend.

Why is ASIC suing Choosi?

From July 2019 to late 2024, Choosi promoted itself as a comparison service for life and funeral insurance, marketing that for these products consumers could choose from multiple insurers.

But according to ASIC, the platform acted as a distribution channel, steering customers toward products underwritten solely by insurance provider, Hannover. In exchange, Choosi received substantial commissions.

In total, ASIC claims at least 4225 funeral insurance and 9478 life insurance policies were sold during that time. For its role in facilitating those sales, ASIC alleges Choosi was paid $61 million.

ASIC deputy chair Sarah Court says ASIC alleges that Choosi "misled thousands of consumers".

'We will contend people were led to believe they were making a sensible decision by comparing policies; however, they were denied genuine choice," says Court.

"Consumers may have been encouraged to buy a funeral or life insurance policy when a cheaper or more suitable policy might have been available from other insurers that were not assessed."

The alleged conduct - which spanned Choosi's website, television ads, social media, and advertorials - may have breached sections 12DB and 12DF of the Australian Securities and Investments Commission Act 2001.

Each contravention carries a maximum penalty of $16.5 million.

In a statement, a spokesperson for Choosi says the company is reviewing ASIC's claims and will respond accordingly.

"Choosi is aware of the concerns raised by the Australian Securities and Investments Commission (ASIC) regarding certain aspects of our advertising. Our customers are at the heart of what we do. We are committed to making any necessary changes that best serves our customers."

A pattern of misleading conduct

This is not the first time regulators have taken aim at comparison platforms.

In 2020, iSelect was fined $8.5 million after admitting it misled users by claiming to compare all electricity plans from its partner retailers. In reality, commercial agreements restricted which plans could be listed, and many customers missed out on better deals.

The ACCC said around 38% of people who used iSelect's service at the time might have found a cheaper plan by shopping around or using the government's Energy Made Easy website.

Other examples include:

Webjet (2023): Sued for allegedly advertising flights "from $X" without disclosing mandatory booking fees of up to $54.90.

Compare the Market (2014): Fined after claiming to compare more health insurers than any other site, when two competitors covered more providers.

Energy Watch (2012): Fined over $2 million for misleading claims about how much consumers could save by switching energy plans.

How comparison sites really make money

According to an investigation by CHOICE in October last year, many commercial comparison sites aren't as independent as they seem.

Instead of offering unbiased product rankings, these platforms often get paid by the retailers they feature through commissions, referral fees, or flat fee-for-service arrangements.

This means the insurance products shown first, or recommended most strongly, may not be the best value for the consumer, but rather just the most lucrative for the site. In effect, CHOICE argues, comparison platforms often act more like sales agents or brokers than neutral consumer tools.

And because fees are often tied to clicks, conversions or policy premiums, the risk is that commercial interests override what's best for the customer.

As ASIC's Sarah Court explains, "Comparison websites must provide a meaningful comparison service and not simply operate as a sales channel or distribution platform for companies."

Court says that while comparison sites can sometimes be useful for consumers, they should only be part of how people shop around for financial products.

Here's what to do instead

According to ASIC's MoneySmart, here's how to compare properly:

Know what to look for: Decide which features - like fees, interest rates, exclusions - matter to you.

Search beyond the site: Check government tools like PrivateHealth.gov.au or Energy Made Easy, and visit providers directly.

Read the fine print: Don't rely on headlines; check the product disclosure statement (PDS) for hidden fees or exclusions.

Ask questions: Before committing, contact the provider and get clarity on anything unclear.

Check the license: Make sure any financial product provider is registered with ASIC.

Get stories like this in our newsletters.