Central Bank to look into dual pricing ‘rip-off’ by insurers
Sinn Féin TD condemns practice of charging existing customers more than new clients
Central Bank governor Gabriel Makhlouf: the Bank plans to look into the practice by some insurers of charging existing customers higher rates than new clients,Photograph: Nick Bradshaw
The Central Bank plans to look into the practice by some insurers of charging existing customers higher rates than new clients, in order to see whether insurance companies are adhering to the regulator’s consumer protection code, even though it is prohibited from playing a role in the pricing of policies.
Sources said that the bank will look, as part of the assessment, at the extent to which general insurance companies are using big data to select which clients are less likely to challenge renewal quotes.
The development comes as the Oireachtas finance committee prepares to call officials from the Central Bank and the Competition and Consumer Protection Commission before it, as it also investigates the prevalence of dual pricing in the insurance industry. Committee member Pearse Doherty of Sinn Féin has called the practice of dual pricing a “rip-off” that punishes customer loyalty.
While the Central Bank does not have a role in the pricing of premiums, it can sanction firms for breaching the consumer protection code, which requires regulated companies to act honestly, fairly and in the best interests of its customers and the integrity of the market. The Central Bank can fine firms up to €10 million, or 10 per cent of annual turnover, for regulatory breaches.
The Financial Conduct Authority (FCA) in the UK said earlier this month that it was considering banning dual pricing, after finding in an interim report on the matter that many of those targeted for higher premiums are vulnerable.
The report said that millions of customers of insurers operating in the UK were paying a combined £1.2 billion (€1.4 billion) more than they should.
Meanwhile, amended rules coming into force from the beginning of next month will force non-life insurers in Ireland to provide quotations for all cover options they offer in the same renewal notice, such as fully comprehensive, third party, and fire and theft coverage for motorists. They will also be required to highlight the previous year’s premium in any renewal notice.
Separately, Central Bank governor Gabriel Makhlouf told reporters at a briefing on Tuesday that he was “pretty confident” that the institution he joined early last month has “probably done as much as we can be expected to do to make sure that the financial system is ready for whatever happens” with regard to Brexit.
Derville Rowland, director general for financial conduct at the bank, said Brexit will result in a reduction of coverage in some insurance lines as some firms operating from the UK and Gibraltar retreat from the Irish market.
The Central Bank had warned earlier this year that niche insurance products may decline or end altogether should a no-deal Brexit materialise. Sources have said that this could include wedding, pet and gadget insurance.
The Department of Finance disclosed last month that that 16 of the 84 insurers that rely on EU freedoms to passport services from the UK and Gibraltar into the Republic have confirmed that they plan to stop writing business in the State after Brexit. The information was contained in a response to a parliamentary question and used data provided by the Central Bank.