The central financial institution plans to ban “constancy fines” on auto and home insurance – The Irish Instances

The central bank plans to ban the widespread practice of auto and home insurers to stealthily increase premiums for loyal customers. However, it fell short of following the UK, which effectively bans vendors from offering discounts below cost to attract new customers.

The regulator said on Wednesday that it is proposing to ban so-called "price walking", in which customers are charged higher premiums in relation to expected costs the longer they stay with an insurer.


This means that insurers cannot charge private consumers who are on their second or subsequent renewal a premium that is higher than the premium they would have charged them on their first renewal.

It estimates that customers who stay with the same auto insurance for nine years or more pay 14 percent more than a driver with a similar risk profile who renews for the first time.

The discrepancy is even greater in household insurance, where the difference averages 32 percent.

Central Bank officials were unable to provide general monetary estimates of how much Irish households could expect in any given year from their proposal, which is subject to a public consultation process ending October 22nd.

The measures, which the bank could put into effect on its own, are expected to apply from July 2022, almost three years after the regulator decided to address the issue of the price difference in insurance.

The UK's Financial Conduct Authority passed a de facto ban on dual pricing in the home and automotive markets in May.

While it is said that insurers are free to set new business prices, they cannot charge an existing customer who wishes to renew their policy more than the corresponding new business price.

Double pricing

The bank's proposals do not go as far as the pledge made by Fine Gael, Fianna Fáil and the Greens in their government program last year to work to eliminate dual pricing in the insurance market.

However, the Treasury Department said it believed the central bank's proposal was "in line" with the government's insurance action plan.

Minister of State for Insurance Seán Fleming said it was "important that the detailed engineering work be completed" and that any regulatory changes "must reflect the specific circumstances of the Irish market, which is different from other major markets".

Gráinne McEvoy, director of consumer protection at the regulator, defended the organization's stance, saying it was "balanced and proportionate" and "reflects the Irish market".

She said the proposed rules would still encourage consumers to "browse" and encourage competition in the market.

"There is a need to avoid unintended consequences," said Derville Rowland, the central bank's chief financial officer. "We don't want the ban to prevent a balanced approach that eliminates discounts for new customers."

However, she said there was "no place" in the market to charge a "loyalty bonus" to loyal customers.

Ms. Rowland insisted that the central bank review schedule and plan to roll out the changes in 12 months was the "fastest possible" pace the regulator could act.

"We are in the leading group in Europe who have driven this," she said. “It is imperative that we analyze our market to see the prevailing characteristics, the prevalence of characteristics and the impact on different customer groups. And it is also very important that you do it right when you intervene like that. "


For the review, the central bank announced that it had captured 90 percent of the auto and motor markets as it accumulated 11 million policy records over a three-year period. She also conducted a survey of around 5,500 consumers.

It estimated the extent to which loyal customers are more likely than not to be covered by comparing actual premiums to a “technical premium” which, in the opinion of an insurer, represents the cost of pricing the policy.

If new vehicle customers typically benefit from a 2 percent discount on the technical premium, someone who has been with an insurer for at least nine years pays an average of 25 percent more than the breakeven point.

The bank said it suggests that auto and home insurers review their pricing policies and processes annually. It is also planned that insurers will seek customer consent in cases where policies are automatically renewed.

As part of an upcoming review of its general consumer protection code, it is also considering additional measures in relation to the resolution of complaints, transparency and the handling of vulnerable customers.

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