The Financial Services Authority is to investigate price comparison websites amid concern that they are misleading consumers into buying unsuitable insurance products.

In a policy U-turn, the City watchdog said that it had decided to begin the review despite previously rejecting calls for regulation after research had come to light that showed that the sites were confusing and potentially misleading.

The British Insurance Brokers' Association (Biba) found that the sites routinely make assumptions about users that can lead to inappropriate quotes, while 84 per cent of users find the sites confusing.

An FSA spokesman said: “We have considered this issue before and decided then that no action was needed. However, in light of the new Biba research, we will undertake a further investigation of the issue and after that has been done we will consider whether we should intervene by rule changes or other regulatory action.”

Price comparison websites such as moneysupermarket.com, which has 55 per cent of the market;confused.com, owned by Admiral; and uswitch.com account for an estimated 50 per cent of Britain's general insurance market, attracting 15million users a month. About 69 per cent of car insurance buyers used a price comparison website the last time that they renewed, according to Consumer Intelligence, the market research group, while 96 per cent of users said that they would use a comparison site again. The sites have been criticised for not making plain the fees that insurers pay to be included in their tables, as well as for failing to protect personal data held on the sites.

The FSA is conducting an ongoing investigation into financial advertising on the internet, including a crackdown on companies that the regulator believes may be misusing search engines such as Google or Yahoo! to get to the top of the list.

In November, the FSA reported that of 77 financial websites it had investigated, 25 per cent fell short of its standards for accuracy, fairness and clarity, but it refused to name and shame the offenders. Only certain elements of price comparison websites' business fall under the auspices of the FSA.

Confused.com said that it had voluntarily asked the FSA if it could be fully regulated in response to consumer demand for tighter rules.

Hayley Parsons, managing director of gocompare.com, said: “People find insurance confusing whichever way they buy it. Price comparison websites have been a force for good in terms of transparency and allowing consumers to check their renewal premium against typically around 50 other insurers.”