The Central Bank’s proposal to ban home and motor insurance companies from imposing so-called loyalty penalties on long-standing customers has been met by a mixed response from parties that will be lining up to have their say as the plan goes through a consultation process in the coming months.
Sinn Féin's finance spokesman Pearse Doherty TD, who lodged a complaint with the Central Bank in late 2019 on the issue of differential pricing and brought a Bill on the matter to the Dáil earlier this year, said that the regulator's move represents a "victory for consumers".
“We now need to move to implement the proposals as soon as possible and to put a stop to the insurance industry and its dodgy practices,” said Mr Doherty. “Until the changes come into effect next year, I would encourage consumers to shop around in order to get the best quote possible and not to simply accept the quote they are given on renewal of their existing policy.”
The regulator said on Wednesday that it is proposing to ban so-called price walking, where customers are charged higher premiums relative to the expected costs the longer they remain with an insurer. It estimates customers that stay with the same car insurer for nine years or more are paying 14 per cent more than a driver with a similar risk profile renewing for the first time. The difference on home insurance premiums averages 32 per cent, it said.
Interested parties have until October 22nd to file submissions to the Central Bank on the plan. The regulator aims to have a new regime in place by July 1st next year.
Cathie Shannon, director of general insurance at Brokers Ireland, which represents 1,225 broker firms, said that the body was disappointed the Central Bank stopped short of following the UK in effectively prohibiting providers offering below-cost discounts to lure new customers, or what is known as dual pricing.
“Insurance companies should never lose sight of the fair value they ought to be providing to consumers and the fact is that differential pricing damages the relationship of trust for which the industry ought to be known,” she said.
Prices and costs
Consumer campaigner and askaboutmoney.comfounder Brendan Burgess also said the proposals do not go far enough. "There is no good reason why insurance companies should be allowed to charge a lower price to new customers than they charge to existing customers," he said. "Prices should reflect the costs. New customers are more expensive than existing customers as there are set up costs, such as commission."
Insurance Ireland said that the proposals were “balanced and proportionate” and that it will engage “constructively” with the Central Bank during the consultation period.
"The report finds that differential pricing benefits some consumers who are engaged and shop around for their insurance to obtain the best price for their needs," said Moyagh Murdock, chief executive of the industry lobby group. "However for other consumers who do not actively engage in shopping around, the practice can bring costs."
