Tesco closes its comparison site

The news that Tesco is closing down its comparison site is unlikely to come as much of a surprise to most of those in the industry. When it launched the site seven years ago, it made bold promises about shaking up the market. Indeed it seemed to be hitting on some important issues that still haven't been addressed.

Here's a quote from its founding MD, Peter Dingle, from 2007:

"Our customers have been telling us they want more help in choosing their motor insurance. They want more than just the usual 'shop around' tool for insurance premiums. We have placed great emphasis on the fact that our site not only compares price but also looks at individual policy features to allow users to make sure they are getting the right policy for them. There will be no extra costs or charges when it comes to paying your insurance, the price quoted will be the same as if the customer went direct."

If RBS didn't go bust, the story might have been different

At the time of the launch, Tesco's financial services arm was still a joint venture with RBS, who back then still owned the UK's largest general insurance company, Direct Line. Tesco Compare's unique selling point was that it would include quotes from other Direct Line Group brands such as Churchill and Privilege, who until then had managed to keep themselves off comparison sites.

If RBS hadn't found itself being bailed out by the government just a year after the launch of Tesco Compare, its future may have been different. But once Tesco bought itself out of its joint venture with RBS, there seemed little appetite to turn its comparison site into a genuine challenger. Meanwhile, Churchill and Privilege soon started appearing on other comparison sites, leaving Tesco with no real competitive advantage over its established rivals.

While the big four sites - Moneysupermarket, Confused, Compare the Market and Go Compare - have been spending tens of millions a year on ever more high profile TV ad campaigns, Tesco has kept a low profile.

It's a shame Tesco never lived up to its ambitions to shake things up and do things differently. The recent FCA review of the market stopped short of recommending radical changes needed to ensure that consumers walk away from comparison sites with suitable products - not just cheap ones.

There's certainly room for a challenger, disruptive brand - but the cost of entry is so high, it takes a company with pockets as deep as Tesco's to be able to play.