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Most insurance companies are using controversial double pricing practices, according to a Central Bank investigation.
The damning findings blow a hole in claims by various insurers that they do not use pricing to identify vulnerable customers who are likely to resist being asked to pay more.
Dual pricing uses big data to select customers who are unlikely to challenge renewal quotes as they are often older and less price-savvy customers.
Previous research by Pearse Doherty from Sinn Féin has found differences of up to € 740 when renewing a motor policy.
the Irish independent has been highlighting for years the corrosive impact that double pricing has on loyal consumers of home and auto insurance.
Now, the Central Bank has recognized that “most companies use differential prices through various techniques” after carrying out the first phase of a dual price review it is conducting.
Differential price is the phrase used by regulators for dual pricing
An initial study of the controversial practice found that it is being carried out by the majority of the 11 insurers inspected. These included insurance companies based here, companies operating here but regulated elsewhere in the EU, and some large brokers.
The prevalence of the controversial pricing practice raises questions about transparency in the industry, especially since most insurers in this market denied engaging in double pricing when they were called before the Oireachtas Finance Committee to discuss it.
The Central Bank found that the boards of insurance companies have not even considered the impact of double pricing on customers.
“There is insufficient evidence of a customer-centric culture with regard to pricing decisions and practices,” the Central Bank concluded after phase one of its dual pricing review.
Regulators have now written to the CEOs of insurers asking them to consider whether their prices are unfair to some of their clients. The boards were also asked to review prices.
Central Bank consumer protection director Grainne McEvoy said: “Policyholders have a reasonable expectation that their insurance company will act honestly and fairly, and that it will act in the best interest of its clients.
“This includes having a pricing policy that is fair, transparent, and discloses important information to customers in an informative manner.”
It occurs when the Government Program agrees to prohibit double pricing.
Sinn Féin finance spokesperson Pearse Doherty has stated that double pricing is about punishing loyalty, and vulnerable consumers are often those who are adversely affected by the practice.
He said: “Today’s findings expose the industry, which has been caught red-handed and which came before the Finance Committee last year claiming there was nothing to see here.
“The Central Bank has confirmed that the insurance industry uses pricing methods that punish loyal customers and harm vulnerable and low-income groups.”
Regulators have now moved on to phase two of their double price review, which will involve examining 10 million documents. This phase of the review is a quantitative analysis and will involve consumer perception, and is likely to be released by the end of the year.
The final review is scheduled for next year.
Irish brokers said dual pricing was unfair.
Cathie Shannon of Brokers Ireland said: “It is not acceptable for any insurer to operate practices that are fundamentally anti-consumer, where the most loyal or the most vulnerable end up being penalized.”
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