Take action to prevent insurance companies from punishing loyalty with constant price hikes

Insurance customers who do not shop should be protected against an increase in their premiums each year.

But the central bank will disappoint some activists this week when it stops calling for an outright ban on all forms of discriminatory double pricing.

Dual pricing is where insurance companies impose a “loyalty penalty” on customers who stay with the same provider.

It also involves discounts to new customers with the aim of gaining market share.

Almost two years after the first launch of a dual pricing investigation, the regulator is set to recommend insurers stop engaging in a key aspect of questionable pricing practice.

He will recommend to the government to legislate to put in place rules which oblige the insurers to act, over a period of six months, to stop what is called the “price walking” aspect of the double price.

This is where insurers gradually increase premiums each year for existing customers who don’t shop at renewal time.

It mainly concerns older customers.

Legislation will be needed if the government accepts the Central Bank’s recommendation.

It is important to note that insurers will always be able to reduce premiums for new customers in an effort to gain market share, especially young drivers who depend on discounts.

But the central bank must back out of the call for a blanket ban on dual pricing for auto and home coverage, as that would ban all discounts.

To close

Irish independent coverage of the impact of dual pricing on loyal consumers.

Irish independent coverage of the impact of dual pricing on loyal consumers.

He is concerned that this will drive up prices for many people.

And she fears that an outright ban on all forms of double pricing will discourage new players in this market.

Lowering prices, or distorting prices as regulators call it, is similar to what the Financial Conduct Authority has done in the UK.

The longer a client stays with an insurer, the higher the cost he pays because of the price hike.

Central bankers have noted in the past that some consumers get a better price by switching.

That’s why they want insurers to still be able to offer discounts to new customers, but prevent them from gradually increasing premiums each year to those who don’t shop.

This means that changers would always get the best deals, but those who are reluctant to change would be spared big increases every year. They will be able to benefit from a loyalty bonus in the future.

Campaigners have called for an outright ban on all forms of double pricing because they claim it is anti-consumer.

Dual pricing uses big data to select customers who are unlikely to dispute renewal quotes, as these are often vulnerable customers.

They are then billed more for home and automobile coverage, despite their loyalty. The best rates are reserved for new customers.

the Independent Irish has been emphasizing for years the corrosive impact of double pricing on loyal consumers.

Last December, the Central Bank said in an interim report that owners staying with the same supplier typically face a loyalty bonus of € 160 per year.

Regulators launched their investigation into the double pricing after a complaint was filed by Pearse Doherty of Sinn Féin in October 2019.

In January, Doherty introduced a bill to ban double pricing of insurance. The bill passed step two in February, but the government imposed a nine-month suspension. It was supported by the Alliance for Insurance Reform, Brokers Ireland and the Consumers Association.

In an interim report, the Central Bank found that “the majority of companies use differential pricing through various techniques”. Regulators call differential pricing dual pricing.

The conclusion was despite some companies claiming that they do not use dual pricing techniques.

The study found that it is carried out by most of the 11 insurance companies inspected. These included insurance companies based here, companies operating here but regulated elsewhere in the EU and a few large insurance brokers.

About Frances R. Smith

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