As the Central Bank of Ireland’s new regulations to combat ‘differential’ pricing in motor and home insurance come into effect, Brokers Ireland said it is unfortunate that the regulations are limited and will not outlaw all forms of differential pricing, but only discrimination for reason of tenure.
The issue arises when insurance companies charge new and existing customers different premiums despite having similar risk profiles.
“The new regulations are applicable to renewal business since July 1 and will prevent insurance companies from ‘price walking’ their renewal customers, that is charging them more each year they stay with the same insurer.
“It is a step forward in that insurance companies will now have to demonstrate that they do not discriminate against their most loyal customers simply on grounds of tenure.
“However, these new regulations do not stop insurers using other forms of differential pricing and they certainly do not mean that consumers may expect their premiums never to increase, as insurers are entitled to change their pricing for many different reasons as they do currently,” Cathie Shannon, Director of General Insurance at the organisation, which represents 1,225 Broker firms, said.
She said all customers deserve the protection of the financial regulator and that it was disappointing that the regulator opted not to investigate with a view to banning other forms of differential pricing which may be observed in the market.
The Central Bank will still allow insurance companies to offer new customer discounts, with the need for consumers to shop around being emphasised.
“In the UK, the FCA (Financial Conduct Authority ) outlawed pricewalking for reasons of tenure from new business stage onwards, taking the view that consumers should not have to shop around in order to receive fair value. The concept of fair value to the consumer must now be embedded in products in the UK.
“The fact of the matter is that consumer behaviour differs greatly with many having a lower ability or willingness than others to search for better offers,” Ms Shannon added.
Ms Shannon said it is clear more than ever that it is a wise move for consumers to shop around at renewal time for home and motor insurance policies, to ensure they achieve best value.
“Broker customers can be assured that their Insurance Broker will search the market on their behalf and obtain the best offer available, they have the expertise and know the risks to look out for. Insurance is unlike many other products in the market because it’s largely essential rather than optional,” she concluded.