A Central Bank review of dual or differential pricing in the insurance sector will not make its first findings until the end of 2020, an Oireachtas Committee has heard.
It has pledged to review pricing for motor and home insurance, with a view to determining the impact differential pricing has on customers, and whether the practice meets the requirements of Consumer Protection Code.
Dual pricing is when insurers charge customers with similar insurance risk profiles different prices for the same or similar policies.
Derville Rowland, the Central Bank’s Director General of Financial Conduct, told the Joint Committee on Finance, Public Expenditure and Reform and Taoiseach that the review will be complex and will take time.
“I think this is a long piece of work that will be multi annual,” she said.
“This piece of work will take us, I have no doubt, all of next year. It'll develop into further work programs.
“The focus on the insurance industry and the dual pricing issue, we anticipate that the first two phases of that work will take most of next year depending on what we find, the level of complexity. There will be work into the following year in all likelihood,” she said.
We are looking at the motor insurance market in Ireland with more than a million policies sold.
“We have to take a relevant analysis of the market participants and the different business models that they have, the different business lines that they have and the cost supporting that, and the strategies, and we have to ascertain the impacts on customers, and we have to directly contact those customers to find the impacts on this, so this is a wide and complex piece of work, ranging across a number of dimensions,” she said.
Ms Rowland told the committee that the Financial Conduct Authority in the UK has carried out research in the area, and it has revealed that differential pricing is “not necessarily a negative thing” as some people can get a good price if they switch provider.
She said the FCA had found that bans on differential pricing can have the effect of dampening competition which can have adverse impacts on marginalised customers who are more price sensitive.
Sinn Féin TD Pearse Doherty cited case studies of people who found they were offered better rates than their renewal quotes when they went to the same company’s website.
“Take Ray, for example, because this goes to the core of it. He renewed his motor insurance with Liberty Insurance, he got a renewal premium of €1,420. He entered the exact same details on Liberty insurance’s website, and he got a quote for €680. That's a difference of 109%.
“Alex from Waterford; works part-time, renewed his motor insurance with AA, he received a renewal premium of €871. Entering the exact same details on the AA website, he got a renewal court for €400, that's a difference of 118%,” he said.
“It's not about what is the best price we can offer you, it is how much can we get away with charging you, that is the approach here so how could they be in compliance with the consumer protection code in relation to their requirement to act fairly with their customers when we see two different prices for the exact same risk profile from the exact same company?” he asked.