Tuesday, 29 September 2020

Ceisteanna (31)

Pearse Doherty


31. Deputy Pearse Doherty asked the Minister for Finance his views on phase 1 of the Central Bank’s review of differential pricing in the insurance market; his views on legislation to prohibit its operation in the insurance market; and if he will make a statement on the matter. [27128/20]

Amharc ar fhreagra

Freagraí ó Béal (6 píosaí cainte) (Ceist ar Finance)

Earlier this month, the Central Bank concluded its phase 1 review of dual pricing and concluded that the majority of insurers in the State were involved in this practice, which acts against their customers. This comes a year after I submitted a dossier to the Central Bank comprising a complaint outlining how this practice affected customers, how it ripped off motorists and homeowners, how it is banned in many other jurisdictions, including in the United States, and how a ban on the practice was being considered in Britain. I put it directly to the Minister during his previous term in Government that this practice should be banned. Does he now believe it has to come to an end? Will he support the legislation I am producing to bring this about?

Given all the work he has done in this area, the Deputy will be aware of what dual pricing is, so I will not go through the definition. As he himself has acknowledged, the Central Bank has now published the findings of a phase of its work in studying this practice in the Irish market. Our programme for Government includes a commitment to remove this practice from the market. I will be looking at the work the Deputy has done in this area and any legislation he may bring forward in that regard.

That being said, the Central Bank review is ongoing and focused on motor and home insurance. It is being carried out in three phases, and the first of these was completed recently. While I welcome the publication of the report, I note with concern that the Central Bank has observed that the majority of firms utilise differential pricing through various techniques. A failure to recognise and acknowledge the practice on the part of some firms has raised significant concerns about their ability to assess its impact on customers. This is why, on foot of this, the Central Bank wrote to the chief executives of these insurance providers on 8 September to highlight its concerns following this first phase. I expect that the firms will respond to these concerns and co-operate with the Central Bank.

The work of the Central Bank is now moving to the next phase of its review before it makes any final recommendations. I believe it is prudent to wait until the review is complete. This is a complex issue and we will need to consider carefully any potential remedies and what impact they could have on consumers. We need to guard against the risk of unintended consequences and ensure that in attempting to address an issue we do not create an undesirable knock-on impact elsewhere or discourage competition or new entrants to the market.

What annoys me is that the Government is signalling today that it will wait until the end of the review. That sounds logical. I instigated the review because of what I had done with my engagement with and complaint to the Central Bank and the Competition and Consumer Protection Commission. Anyway, the first phase of the review has basically vindicated everything I have said. It has found the practice operates on a wide scale across the market. Many of these operators operate from Britain. The United Kingdom Financial Conduct Authority, FCA, has already concluded its final report. The FCA is going to ban the practice that punishes people for what is called dual pricing or the loyalty premium. If a customer is with an insurance company for five years or more, then the customer will be charged 30% extra on average in terms of the renewal practice. This problem is real right now. It is reckoned operators have been overcharging 6 million people in Britain. People here are being overcharged hundreds of millions of euro. The firms are using big information, including social media sites. They can take information from posts, photographs and videos. I appeal to the Minister to show urgency and to move to give us a firm commitment that this will be banned within the year.

The comparison with the FCA in the UK is interesting. The FCA began this work in October 2018. It has now published a final report. It was published this week along with a related consultation document. The FCA is inviting views on its consultation document up to 25 January 2021. The FCA has indicated that in the aftermath at some point next year it will publish a policy statement. That is the timeline for what is happening in the UK, as I imagine Deputy Doherty is aware. Deputy Doherty has been fair and accurate enough to describe my approach as logical. The UK approach illustrates that we should await the final phase of the Central Bank because I need to understand fully the view of the regulator in respect of this matter, the potential remedies and the consequences of action that the regulator or the Government can take. Deputy Doherty will see from the comparison with what is happening in the UK what timelines those in the UK are operating to. I am absolutely aware of the urgency of this issue. I welcome that the Central Bank has done this work quickly. I will act on this issue as soon as I am clear about what kind of action can deal properly with the matter but not create other difficulties that I would then be held to account for.

The Central Bank has taken a year to confirm what I had submitted to it in the dossier. I am not knocking the bank for doing this. It will take a further year to finish phases two and three, which will include final recommendations. Then the Government will consider it. The point I am making in terms of Britain is that the insurance companies operating here are operating in Britain as well. There is no need for us to reinvent the wheel. These companies are ripping off their customers. Dual pricing is happening - we know that. It is banned in 20 states across the USA. The FCA final report included what the interim report said, which was that the FCA wants to ban it as well. The problem is that it will take the Minister three or four years to do this. In the meantime, people are being ripped off by the insurance industry. They are telling the European Insurance and Occupational Pensions Authority that technology has developed so far that they can look at a customer's social media posts, including posts of their children playing, and draw information to figure out how much they can stick that customer in terms of the insurance premium quote. That is how much this is moving on. As we sit here, consumers are getting ripped off. We need to move now rather than reinvent the wheel. We should look to what is happening in Britain.

The actual timeline is that the Central Bank report began in January and the report is now published. The bank has moved with speed on this issue. The Deputy compared our work to what is happening with the FCA. The FCA has taken longer to do this work. It has now published something that might lead to action next year. That is the timeline for what is happening elsewhere. The Central Bank has done this work across this year and within the year. I know the urgency of this issue. Equally, I know that while I am expected and want to make progress in ensuring we can bring down the cost of insurance for businesses and families and deal with unfair practices, it is also the case that in any action I take I need to ensure it works and does not have other consequences. If that were to arise, the Deputy would hold me to account for that.

Deputy Doherty was open about drawing comparisons with what the FCA is doing in the UK. He can see the timeline that organisation is operating to. The Central Bank has done this complex tranche of work quickly. It has already followed up with the chief executives on this. I will outline what steps the Government will take on the matter when the Central Bank has quickly completed the work it has committed to in this area.