THE CENTRAL BANK has confirmed that a ban on price walking in motor and home insurance will come into effect from 1 July, meaning companies cannot charge longer term customers a higher premium on renewal than customers who renew their protection after just one year.
Following a review by the Central Bank of the use of differential pricing in these insurance markets, today it published new regulations to remove loyalty penalties for customers.
The main conclusion from the review was that the practice of price walking “could result in unfair outcomes” for some consumers in the motor and home insurance markets.
The new ban means that from 1 July, insurance providers cannot charge relevant renewing customers a premium that is higher than they would have charged an equivalent year one consumer renewing their policy. However, the Central Bank said new customer discounts will be allowed “to support competition and switching”.
In addition to the price walking ban, under the new regulations insurance undertakings and insurance intermediaries will be required to carry out an annual review of motor and home insurance pricing policies and processes to ensure sound practices.
The regulations set out the information that must now be provided to consumers in advance of the automatic renewal of an insurance policy, including the right to cancellation.
The Central Bank said this is another measure to encourage consumers to consider the potential benefits of switching and to increase consumer awareness of the options available to them at renewal time.
Commenting on the publication of the regulations, Central Bank director general, Derville Rowland said:
“Financial services providers are responsible for providing products that meet their customers’ needs fairly.
“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.”
She said the regulations will benefit consumers by removing the loyalty penalty for consumers of long tenure while preserving competition in the market.
“The publication of these measures does not bring to a close our consumer protection work in the insurance sector,” she said. “We will continue to engage with insurance providers to ensure work in relation to oversight of pricing practices is undertaken.
“We will monitor developments in the private motor and home insurance markets to better understand customer engagement in the market and how it might be improved and to ensure that firms are acting in the best interest of consumers and delivering fair outcomes.”
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