Press release
Minister of State Sean Fleming TD welcomes the completion by the Central Bank of the first phase of its review of differential pricing in the insurance sector
Published on
Last updated on
Published on
Last updated on
Central Bank sets out requirements to firms following first phase of review of differential pricing in the insurance sector
Today (Wednesday 9 September) the Minister of State with responsibility for Financial Services, Credit Unions and Insurance, Sean Fleming TD, welcomed the completion by the Central Bank of the first phase of its review of differential pricing in the insurance sector. The Minister of State noted with concern that in the initial phase of this work, the Central Bank has found that the majority of firms utilise differential pricing through various techniques and has consequently identified issues that merit action from relevant firms now.
He stated:
"I expect that insurance firms will respond to these concerns in a positive manner and cooperate with the Central Bank. Furthermore, this should assist in progressing the next phases of the review."
Minister of State Fleming went on to state:
"I will be meeting with the Central Bank later this week and will discuss the review and other insurance related issues. In addition, both Minister Donohoe and myself will raise this issue with Insurance Ireland in the coming weeks as part of the government’s engagements on insurance reform."
Separately, Minister of State Fleming noted that the recently agreed Programme for Government includes a commitment to work to remove dual pricing from the market and proposals will be brought to Government shortly to commence implementation of the Programme. The Central Bank’s review is an important element of this commitment, and it is important that the review now move to the next phase, so that a conclusion can be reached on this issue. This next phase will assess the degree of differential pricing among private car and home insurance policy types. In parallel, a consumer insights exercise will be undertaken to further develop the Bank’s understanding of how consumers engage with insurance providers. This is a positive development but as it is a complex issue, it will need careful consideration of any potential remedies, and what overall impact they would have on consumers.
Previously both Minister Donohoe and Minister of State Fleming stated publicly that they believe the insurance industry needs to treat their customers fairly and in line with the Central Bank Consumer Protection Code. The same applies in relation to any practices in relation to pricing that are not fair to their customers.
ENDS
Note to Editors:
Dual Pricing, also called “differential pricing” or “price discrimination”, is the practice of quoting two different price points in different markets for the same product or service. The “different markets” could be differences between new and existing customers or between different channels for accessing the quoted price (e.g., via telephone versus online). For insurance, there is often talk of a “loyalty premium” that penalises consumers for not shopping around. The issue is not unique to insurance, and often found in utilities as well.
The Financial Conduct Authority in the UK is currently conducting a study into the practice, and has stated that it is considering banning the practice. However, the report and final recommendations are still outstanding. The Central Bank, late last year, announced that they are to carry out a study into the practice of dual pricing. The Bank appeared before the Committee on Finance, Public Expenditure and Reform, and Taoiseach on 12 November 2019 where it outlined in broad terms how it intended conducting its review into dual pricing.
The Central Bank’s review into differential pricing is focussing on motor and home insurance, as the most widely held insurance products in Ireland.
Their review is being carried out in three phases:
It is the first phase of the review that has been completed today and for which the press points above address. This is a complex issue and will need careful consideration of any potential remedies, and what impact they would have on consumers in an overall sense.