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Dáil Éireann díospóireacht -
Thursday, 14 Jan 2021

Vol. 1003 No. 2

Insurance (Restriction on Differential Pricing and Profiling) Bill 2021: First Stage

I move:

That leave be granted to introduce a Bill entitled an Act to prohibit the discriminatory pricing of certain insurance premiums payable by certain persons to the extent that such pricing is on the basis that any such person is a pre-existing customer of an insurance provider, to prohibit the use of profiling techniques in the calculation of such insurance premiums to determine whether or not such customer or class of customers are likely, or the extent to which any such customer is likely, to renew the policy concerned, to restrict the use of such profiling techniques by insurance providers in respect of new or potential customers and to provide for related matters.

Dual pricing is used by insurance companies to identify customers who are less price sensitive and less likely to shop around in order to target them with artificially high prices. Companies do this by using opaque and complex pricing models and big data, without the knowledge of the consumer. Dual pricing is known to have a disproportionate impact on older and vulnerable customers. Its explicit purpose is to overcharge and price-gouge customers. It is now time to ban it and that is what my legislation will do.

In September 2019, I wrote to the Governor of the Central Bank requesting an investigation into the practice of dual pricing. In October 2019, I submitted a complaint to the Central Bank regarding the practice of dual pricing in the insurance market. I argued that dual pricing was deeply embedded in the market, citing research done by the Financial Conduct Authority, FCA, in the UK, regulations enacted in the US and analysis done by leading insurance consultants in the Irish market, including consumer samples that I gathered myself. The Central Bank agreed to launch an investigation on foot of my complaint. Its interim report published last December confirmed that dual pricing is endemic in the industry, with more than 70% of customers paying more than the true cost of their policies as a result. It is estimated that 2.5 million policy holders paid a combined total of €187 million more than the actual cost of their policies in a single year.

Insurance companies are using dual pricing to discriminate against, and rip off, their customers. Between 2014 and 2017, 20 US states banned the practice of dual pricing, recognising that its use is discriminatory. These bans were recommended by the National Association of Insurance Commissioners, NAIC, a body governed by the 50 state insurance regulators. In 2015, the association recommended that any two insurance customers with the same risk profile should be charged the same premium for the same coverage and that is what is at the core of this legislation. It will apply to all motor and home insurance contracts, as provided for in section 2. Section 3 will ban dual pricing by requiring insurance providers to use only rating factors directly linked to risk to be insured, prohibiting the use of different rating factors for new and renewing customers. Section 4 will require insurance providers to inform customers of the rating factors used in the calculation of the premium offered. No longer will insurance providers be able to offer extortionate premiums without providing the basis on which they are calculated. Section 5 requires the Central Bank to draw up regulations for the proper and effective regulation of the provisions in sections 3 and 4.

Some people may have concerns that the Central Bank rather than the Dáil is best positioned to determine how dual ricing is removed from the insurance market but this legislation answers those concerns. It gives power to the Central Bank to make the regulations that will ban this practice. Section 5 requires the Central Bank to produce a code of practice that will assist the courts and the Financial Services and Pensions Ombudsman where an insurance company has broken these laws. Section 6 requires the Central Bank to publish an annual report assessing the industry's compliance with the provisions of the legislation and the code of practice referred to in section 5, with a copy of same to be laid before the Oireachtas. Section 7 will amend Part 1 of Schedule 2 of the Central Bank Act 1942 so that the Central Bank can sanction insurance companies that practice dual pricing and breach sections 3 and 4 of the Bill. Section 8 provides that the provisions of this legislation will come into operation no later than four months after its passage.

This legislation will ban dual pricing, end discrimination and bring transparency to the setting of prices. It will radically shake up the insurance market for the better. In Britain, the FCA found that a ban on dual pricing would result in savings of between €4 billion and €12 billion over a decade, increase competition and reduce the time customers spend switching providers. The practice will be banned in the UK no later than October this year. Irish consumers deserve no less. This legislation will require the industry to do what should be a given, namely to price fairly and transparently. This legislation has been in the making for many months. I commend staff of the Office of Parliamentary Legal Advisers who assisted me in drafting this legislation. I also wish to thank stakeholders for their continued engagement, including the Alliance for Insurance Reform. Finally, I wish to mention my own staff, Mr. Paul McIlvenny and Mr. Simon Gillespie, who were instrumental in assisting me in the production of this legislation. In the coming weeks I hope, and expect, to enjoy cross-party support for this Bill.

Question put and agreed to.

Since this is a Private Members' Bill, Second Stage must, under Standing Orders, be taken in Private Members' time.

I move:"That the Bill be taken in Private Members' time."

Question put and agreed to.
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