Ministers Donohoe & Fleming welcome publication of Central Bank’s Differential Pricing Review Final Report
Foilsithe
An t-eolas is déanaí
Teanga: Níl leagan Gaeilge den mhír seo ar fáil.
Foilsithe
An t-eolas is déanaí
Teanga: Níl leagan Gaeilge den mhír seo ar fáil.
Ministers Donohoe and Fleming welcome the Central Bank of Ireland’s Final Report and Public Consultation on Differential Pricing in the Motor and Home Insurance Markets and seek swift action by Insurers
The Minister for Finance, Paschal Donohoe TD, and the Minister of State with responsibility for Financial Services, Credit Unions and Insurance, Seán Fleming TD, today (Wednesday) welcomed the publication by the Central Bank of Ireland of its Final Report and Public Consultation on its Review of Differential Pricing in the Private Motor and Home Insurance Markets. In particular, the Ministers support the pro-consumer proposals to:
Commenting on the report, Minister Donohoe said:
“We would like to thank the Central Bank of Ireland for its detailed work and careful consideration in bringing this evidence-based report to fruition. The Government welcomes that the Central Bank has proposed to end the practice of ‘price walking’; a form of dual pricing, and that it will now commence a consultation on its detailed legislative proposals. As noted earlier this year, it was important to allow the detailed technical work be completed and, as this is a complex issue, it is essential that any regulatory changes are tailored to the specific circumstances in the Irish market, which is different to other larger markets”.
Minister of State Fleming said:
“The Government is committed to tackling the issue of dual pricing under its Action Plan for Insurance Reform and as such we welcome the publication of this Report ahead of the September target. Our officials will examine the Report’s findings, as a matter of priority and are ready to assist the Central Bank in any way with the implementation of these proposals. We would strongly encourage all stakeholders with an interest in this matter to respond to the public consultation being held by the Central Bank on changes to its Consumer Protection Code, to ensure that their views can be considered. The report also raises a number of issues that the insurance industry needs to reflect on right now. We have consistently stated our belief that the industry should treat customers honestly, fairly and professionally. While the consultation process is important, given the technical nature of this matter, we also expect that all insurers will now review and end these practices. In this regard, renewed Ministerial engagement with the main insurance companies is envisaged for the autumn.”
ENDS
Note to Editors:
Government Action Plan for Insurance Reform
o “Examine the Central Bank’s Review of Differential Pricing in the Motor and Home Insurance Markets and take any appropriate actions as deemed necessary in light of the findings of the Central Bank of Ireland in their final report.”
Differential Pricing Explained
Differential Pricing – The Central Bank defines differential pricing in insurance services as a circumstance or practice whereby customers with a similar risk and cost of service are charged different premiums for reasons other than risk and cost of service. This includes the use of any modelling technique or the application of a non-risk adjustment during the pricing process, which leads to customers with a similar risk and cost of service being charged differing premiums. It includes a range of techniques that combine information about expected claims experience and customer behaviour - for example, the tendency to renew or shop around.
Dual Pricing – This is a form of differential pricing. This is where new and renewing customers with a similar risk and cost of service are charged different premiums for reasons other than risk and cost of service.
Price Walking – This is where customers are charged higher premiums relative to the expected costs the longer they remain with an insurance provider.
Central Bank Review – further background
The Report concludes that:
Accordingly, the Central Bank is proposing to:
A public consultation process on these proposals will run until 22 October 2021, and the Central Bank intends that the finalised measures will apply from 1 July 2022.
Central Bank Proposals
o Ban price walking in the motor and home insurance markets for personal consumers.
o Require providers of motor and home insurance to personal consumers to review their pricing policies and processes annually.
o Introduce new consumer consent and disclosure requirements to ensure the automatic renewal process is more transparent for all personal non-life insurance products.
Next Steps