Halting ‘price gouging’ of insurance customers could take another year, Dáil told

Sinn Féin introduces Bill based on British legislation to end ‘loyalty penalty’

A move to ban dual pricing where insurance companies impose a “loyalty penalty” on customers who stay with the same provider will be delayed for at least another nine months while the Government does “greater analysis of the complex issues involved”.

Sinn Féin finance spokesman Pearse Doherty introduced a Bill in the Dáil to end "price gouging" of consumers where existing customers pay a more expensive premium than new customers despite having similar risk profiles.

Mr Doherty, who has campaigned on the issue for almost two years, said his Insurance (Restriction on Differential Pricing and Profiling) Bill is based on legislation from Britain that he claimed will this year ban the practice of dual pricing.

“Irish consumers deserve no less,” he said.


It is expected a ban on the practice would cut premiums by up to 27 per cent for home owners who have renewed up to 10 times and up to 34 per cent for motorists, and would benefit 77 per cent of motor insurance policies and 67 per cent of home insurance policies.

Although the Government will not oppose the legislation, it has called for the Bill to be reconsidered in nine months’ time “to allow for greater analysis of the complex issues concerned following the publication of the Central Bank’s final report on differential pricing later this year”.

Minister for Finance Paschal Donohoe said the Central Bank would issue a final report on the issue at the end of the year and it was appropriate the independent regulator be allowed to complete that report.

He also said accurate comparisons should be made with action by other jurisdictions. The British authorities had published proposals, but they are subject to further feedback followed by a policy statement with implementation next year, he said.

The Government has serious concerns about the Bill, he said, and the difficulties it could create for insurance companies to actually offer discounts or for the ability of new insurance providers and suppliers into the market or existing providers to provide coverage in areas they have not previously covered.

“That is a legitimate concern,” he said pointing to the childcare sector where just two insurers offered coverage.

Mr Doherty said insurers in Ireland “rip off” their customers and charge consumers “much higher prices than the actual cost of their policies”. Companies identify customers who are likely to renew “and then charge them the highest price possible before they’re tempted to switch to a competitor”.

“Instead of rewarding you for your loyalty they increase your premium in the knowledge that you are more likely to renew than to switch. That is the loyalty penalty.”

He gave the example of Ray, who received a renewal quota for his car from Liberty Insurance for €1,420, but it was €680 when he went online for the exact same policy from the same provider – a price difference of €740, the "loyalty premium".

The Central Bank carried out an investigation after he made a complaint and in December last year reported that dual pricing affects more than seven in 10 Irish policy holders.

More than 20 states in the United States – including New York, California and Florida – banned the practice, and in Britain the regulator found that in 2018 six million policy holders were overcharged a combined €1.4 billion.

Under the Bill’s provisions renewing customers will no longer be charged artificially high prices based on their likeliness to renew, their spending practices, economic background or any other trait not linked to risk.

Labour finance spokesman Ged Nash pointed out fewere thabn half of Irish consumers change their energy provider while fewer than one in four switch insurance companies while last than 0.03 per cent of customers changed to a different bank.

He said customers do not change for numerous reasons including the time involved, and the difficulty in keeping up with complex insurance policy offerings.

Social Democrats joint leader Róisín Shortall said “the Central Bank is not sufficiently consumer focused” and did not collect enough data on vulnerable customers, market concentration and market volatility.

Marie O'Halloran

Marie O'Halloran

Marie O'Halloran is Parliamentary Correspondent of The Irish Times