Central Bank to ban 'rip-off' practices by insurers for loyal customers 

Under new rules, insurers will not be able to charge renewing customers a premium that is higher than they would have been charged if it was their first time taking out their policy

A ban on insurance companies charging a “loyalty penalty” to customers who choose to renew their policies will take effect on July 1, the Central Bank has said.

It said that, from this date, insurers would not be able to charge renewing customers a premium that is higher than they would have been charged if it was their first time taking out their policy. This practice has been referred to as price walking, or differential pricing.

However, the new Central Bank rules will allow insurance companies to offer discounts to attract new policyholders that may be at a premium lower than existing policyholders.

A report published last year highlighted how consumers who opted to stay with the same insurer for long periods of time could be charged far more when it came to the price of renewing their policy each year.

The Central Bank revealed that loyal customers of nine years standing could expect to pay 32% more on their home insurance than a new customer, and 14% more in the case of motor insurance premiums. 

Sinn Féin’s Pearse Doherty described the report as a “shocking indictment of the industry and how it rips off consumers”.

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In announcing the date for the introduction of the price walking ban on Tuesday, the Central Bank gave an example of two people wishing to renew their insurance.

Price differences

Jim wishes to take out an insurance policy for the first time while Jane is opting to renew it for the ninth time. The expected cost of providing both policies is €700 but Jim is charged €763 while Jane is charged €875 — a difference of €112.

Under the Central Bank rules, such differential pricing will be banned.

Insurers and brokers will need to carry out an annual review of motor and home insurance pricing policies and processes to ensure “sound practices”.

The new rules will also set out information that must be given to customers in advance of the automatic renewal of an insurance policy, including the right to cancellation.

Central Bank director general of financial conduct Derville Rowland said: We have consistently stated that we will intervene where we have reason to believe that unfair practices are occurring that take advantage of consumer behaviours and habits and we will prioritise the interests of consumers over the behaviours and conduct in firms.

“These new regulations will significantly enhance the consumer protection framework. This will benefit consumers by removing the loyalty penalty for consumers of long tenure while preserving competition in the market.” 

Ms Rowland said these measures would not bring an end to its efforts to protect consumers in the insurance sector.