Insurance customers no longer facing 'loyalty penalty' following regulations

Regulations introduced last year to ban charging higher premiums to customers who remain with the same insurer are working as intended, Central Bank said

A Central Bank review into the insurance sector in 2021 found the practice of 'price walking'  —whereby a person is charged higher premiums the longer they remain with an insurer — was 'particularly evident'. Picture: Leah Farrell/Rollingnews.ie

The Central Bank of Ireland has said regulations banning the practice of “price walking” in the insurance sector are working as intended and consumers are no longer being hit with a “loyalty penalty”.

In 2021, the Central Bank undertook a review of differential pricing in car and home insurance markets due to concerns companies were engaging in unfair, hidden or discriminatory practices which sought to take advantage of customer vulnerabilities.

Differential pricing is where customers with a similar risk and cost of service are charged different premiums for reasons other than risk and cost of service.

The practice can harm consumers, particularly if quietly used to increase the prices of policyholders or it affects vulnerable groups or those with differing abilities, time or willingness to search for better offers.

The review found the practice of “price-walking” — whereby a person is charged higher premiums the longer they remain with an insurer — was “particularly evident”.

The bank also noted oversight of pricing practices was “lacking” and automatic renewal processes, which are a common feature of the insurance market, “lacked transparency”.

In 2022, regulations were introduced to ban “price walking”. In its review of the impact of the regulations, the bank found consumers who were on their second or subsequent renewals were no longer paying premiums that were higher than they would have if they were on their year one renewal.

“This means that consumers who remain with their current insurance provider no longer pay a loyalty penalty,” the bank said.

“Firms have achieved this by ensuring that tenure is no longer a factor used to increase the premium charged to customers.” 

These new regulations have not stopped insurance companies continuing to offer discounts for new customers and consumers still have the ability to shop around for discounts.

The review also found insurance providers now have “much more robust oversight processes, analysis and reporting in relation to their pricing practices and models”.

The Central Bank said it was “satisfied” the regulations were working as intended and had “not caused any unintended consequences”.