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'Loyalty is no longer rewarded': Consumer watchdog to look at impact of 'loyalty penalties' imposed by insurance companies

Customers are experiencing successive price increases, according to the CCPC.

Image: Shutterstock/fizkes

IRELAND’S CONSUMER WATCHDOG is to carry out “considerable” consumer research into pricing strategies used by utility and financial companies, such as those in the insurance industry. 

Competition and Consumer Protection Commission (CCPC) chief executive, Fergal O’Leary, will tell the Oireachtas Finance Committee today that it will look at the incidence of switching and price checking.

The impact of loyalty penalties on particular groups of consumers such as older consumers or those with low financial wellbeing will also be investigated, he says.

O’Leary says “businesses increasingly know that many consumers don’t have the time
or the ability to switch so consumers experience successive price increases” known as “price walking”.

“Loyalty is no longer rewarded, this is disappointing but it is a reality for consumers,” he states.

The impact of rollover contracts will also be investigated.

Dual-pricing 

The subject of today’s meeting is dual-pricing in the insurance industry.

Two months ago, the committee said it was launching an investigation into the practice by some insurance firms of charging current customers higher rates on renewal than the rates offered to new clients. 

Sinn Féin TD Pearse Doherty said businesses throughout the State are being charged “rip-off prices by the insurance industry”.

“This is squeezing incomes and has led to the closure of businesses throughout the State,” he said.

There is no better example of this than the industry’s practice of price discrimination that punishes loyal customers when they renew their premium.

Doherty said his own insurance company charged him a renewal price of €856 and he was quoted a premium of €571 on the website after entering the same details.

He said the practice is widespread across the industry and is “wholly unjustifiable”.

Doherty requested the Central Bank and the CCPC investigate the issue, with the Central Bank confirming last month that it is reviewing the concerns.

Today, the CCPC will state that it is also carrying out its own body of work. 

Without pre-empting that work, O’Leary will tell committee members that he expects the review will result in a number of actions in 2020.

He states that recommendations to Government will be forthcoming on how sectoral regulators and advocacy groups can address any identified consumer harm.

Switching providers

“This will focus in particular on groups of consumers who may find it hard or impossible to switch providers,” he said.

Specifically in relation to insurance, the CCPC said it will engage with the Central Bank as their research and bank’s market study progresses.

It also plans to engage with national and European counterparts to share information and keep up to date with developments. A public awareness campaign will be rolled out which will inform and provide information to consumers as to how they can switch service providers.

O’Leary says he is “acutely aware” that the committee is concerned about the issue of dual pricing.

“The CCPC recognises the importance of this work and is committed to playing our part, as quickly as we can, in providing an evidence base for firm actions to help consumers.

O’Leary noted that two weeks ago a European Directive to modernise consumer law was adopted.

It aims to enhance transparency in online transactions, particular regarding the use of online reviews, personalised pricing based on algorithms or higher ranking of products due to paid placements.

In relation to personalised pricing, the Directive will ensure that a company has to inform consumers when the price given to them is ‘personalised, on the basis of automated decision-making.

Insurance Ireland will also appear before the committee today. It is due to tell members that as a trade agency it does not hold the data of its members on pricing, and therefore will be limited in what information if can give.

In its opening statement today, it highlights that the Insurance Ireland has agreed fully engage with the Central Bank on its review of dual-pricing by the insurance industry in Ireland.

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