Dáil Éireann Debate, Wednesday - 15 February 2023
72. Deputy Emer Higgins asked the Minister for Finance further to Parliamentary Question No. 246 of 22 November 2022, if he will explain his statement that the Central Bank cannot dictate the pricing or provision of insurance products, given that it has recently banned the practice of price walking, thus intervening in the pricing of motor insurance; and if he will make a statement on the matter. [7712/23]
View answerIn order to provide a complete response, my officials contacted the Central Bank of Ireland in relation to the Deputy’s query. The Central Bank has advised that the Consumer Protection Code sets out its expectations of how regulated entities, including insurance companies, should treat consumers. The Code states that regulated entities must act honestly, fairly and professionally in the best interests of their customers and that they must act with due skill care and diligence.
However, the Central Bank has stated that it has no remit over the pricing of insurance products or the practices of insurers in relation to underwriting particular risks, these are commercial decisions for the insurers themselves. In line with market intervention limitations, the Central Bank has indicated that it only intervenes on pricing matters where there is a legal basis to do so and where it sees firms engaging in unfair, hidden or discriminatory practices which seek to take advantage of customer vulnerabilities.
In the case of the Central Bank’s differential pricing review, it was determined following an extensive and detailed review by the Bank that the practice of price walking was unfair and could result in unfair outcomes for some groups of consumers in the private car and home insurance markets. Price walking occurs where customers are charged higher premiums relative to the expected costs the longer they remain with an insurance provider.
The Central Bank subsequently implemented new Regulations to ban price walking from July 2022. This means that insurers can no longer charge consumers who are on their second or subsequent renewal a premium that is higher than they would have charged them if they were a year one renewal customer.
The Government supports this ban, and believes the approach taken by the Central Bank is appropriate, proportionate and well-suited to the Irish insurance market. Importantly, it still allows insurers to offer new business discounts, which should encourage beneficial switching activity, encourage healthy competition, and assist potential new entrants to the Irish market to attract customers. It achieves all of this, while still removing the unfair “loyalty penalty”.
