The insurance industry is coming under pressure to outline how and when customers will benefit from a Central Bank plan to outlaw premium rises for existing customers.
On Wednesday, the Central Bank revealed that loyal customers of nine years standing can expect to pay 32% more on their home insurance than a new customer, and 14% more in the case of motor insurance premiums.
The regulator has proposed to ban the practice, known as "price-walking" from July 2022.
However, consumer advocates say the industry should compensate customers who have previously been penalised for their loyalty, with a goodwill payment.
“This is an indictment of the procedure followed by the insurance sector,” said Dermott Jewell, policy adviser with the Consumer Association of Ireland.
“They have to be held accountable, and a key part of this should be that the effects should be retrospective,” he said.
“They’re going to have to be very clear as to how they’re presenting their pricing going forward, and there should be a goodwill gesture after this comes into effect next year to make amends with customers who have been treated poorly.”
Industry group Insurance Ireland said it “welcomes” the report, which it said was “balanced and proportionate” and said it would “engage constructively” with a pending public consultation process on how the proposals should be implemented.
“They’ve welcomed the report, so we have to assume they’re going to take responsibility,” said Mr Jewell.
The Alliance for Insurance Reform, which represents private and commercial policyholders, said price-walking “was the one that we would have wanted to disappear”.
Director of the alliance Peter Boland welcomed the Central Bank’s proposals and condemned the “disgraceful targeting of loyal customers” on the part of the insurers.
Asked if the insurance industry should be expected to foot the bill for the new rules, Mr Boland said “we’ll await the proposals as to how this will operate”.
“But the money has to come from somewhere. The motor insurance industry has been robustly profitable for the last number of years so we don’t see that as being beyond what’s possible,” he said, adding he felt a further 12 months before enacting the proposals “appears inordinate”.
In 2019, Irish insurers’ costs were 56% the value of the premiums they took in, according to a recent report from the National Claims Information Database, which reports to the Central Bank.
The regulator said it had not found evidence that vulnerable customers, such as the elderly or those without access to the internet, were “specifically adversely impacted” by differential pricing, but added that likewise “firms do not specifically consider pricing outcomes with respect to vulnerable consumers”.
Derville Rowland, director general of financial conduct with the Central Bank, said the manner of customer they had found was less likely to switch providers “does not directly correlate necessarily with vulnerability”.
She said such people tend to have “certain features”. “They can actually be in the higher socioeconomic range of income, they can be the more well-off. They can also be the older customer,” she said.
Ms Rowland added she “fundamentally disagrees” that the review, which was first instigated in 2018, had taken too long to deliver its final report.
“The pace has been very fast indeed. This is a complex and thorough piece of work, we are in the leader group if you look at this globally,” she said.
She also stressed the Central Bank’s preference for how its proposals are to be enacted would be via its own legislative powers, as opposed to those of the Oireachtas.
Meanwhile, Ministers at the Department of Finance Paschal Donohoe and Sean Fleming welcomed the new report and “in particular” its “pro-consumer proposals”.
Last February, the Government voted to delay a Sinn Féin bill on the subject of dual pricing pending the completion of the Central Bank investigation into the matter.
Sinn Féin’s finance spokesperson Pearse Doherty described the Central Bank’s proposals on Wednesday as being a “victory for consumers”.