Dual-pricing clampdown on insurance firms long overdue

Despite industry denials, the Central Bank of Ireland – as part of a 2020/2021 investigation – discovered that the majority of the 11 insurance firms it reviewed did in fact deploy differential pricing albeit through various techniques. Differential pricing, dual pricing or price walking – it has different names – occurs when customers with similar risk profiles are charged different premiums.

Insurers in the car and home insurance sectors have for some time been hiking up the prices for longstanding customers in the hope they won’t notice or be bothered to change provider while simultaneously offering new and prospective customers discounted or lower rates.

The fact that this odious practice of effectively penalising loyalty was a regular if not widespread practice here couldn’t have come as much of a surprise to consumers. It was operating in plain sight. Why the regulator, the consumer’s chief guardian, has taken so long to get around to cracking down on it is another matter. It only appears to have looked into it on foot of a similar probe in the UK.

Taking ‘advantage’

Nonetheless, it is now moving to stamp it out. In an address to the Compliance Institute, the Central Bank's director of financial regulation Gerry Cross said the regulator would be sticking to its plan of introducing a ban from July of this year despite requests for a six- to nine-month lead-in period. Such behaviour took "undue advantage of customers' behaviours" and was unacceptable and there was an urgent need for it to be tackled, he said.

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“Counter to what might be the legitimate expectation of a customer that by proving themselves to be a good customer, a loyal customer, their premiums would reduce taking due account of their overall riskiness, in fact the reverse has been happening,” Mr Cross said. “Insurers have noted this loyalty and taken covert advantage of it to charge the customer more on renewal.”

This is a welcome move by the regulator but consumers should still take a leaf our Minister of State Sean Fleming’s book by shopping around for a better price each year.