Friday 17 January 2020

Charlie Weston: 'Be ready to switch - or insurers using 'big data' will hit you with a huge premium hike'

Review: Derville Rowland. Photo: Colin O'Riordan
Review: Derville Rowland. Photo: Colin O'Riordan
Charlie Weston

Charlie Weston

Big data is being used against us, and it is costing the unwary a fortune.

Insurers are using their data analytical tools to identify customers who the system tells them may not be very price sensitive, so they hit them with a whacking great increase in their premium.

The increase is for no particular reason other than that they often get away with it.

Mostly this is done by sending out renewal premium letters that are hugely more expensive than the one paid by the motorist the previous year.

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But another nasty way of price discriminating has emerged lately. This happens when customers are encouraged to register on the website of the insurer.

When it is renewal time and you log on to the website, you are presented with an alarming note with a warning triangle sign and highlighted in yellow that there was "an outstanding balance on this policy".

It is done this way to get you to renew well before the renewal date and not get competing quotes. This is sharp practice.

One case examined by this journalist involved the cost of cover going from €622 last year to €800 this year. That is an increase of 29pc, an astounding rise by any measure.

This is despite the Central Bank finding that the overall cost of claims for motor insurers fell by 2pc in the 10 years up to 2018.

Anyone who signs up for a deal like that is being heavily exploited by dual pricing, and is helping to fatten the profits of insurers.

The pity of the situation is that thousands of people fall victim to tricks like this every day.

The practice is all the more sinister given that motor insurance is compulsory.

Dual pricing is a conspiracy against consumers. That is why regulators in the UK regard it as unfair, as it punishes loyalty. British regulators are now considering banning dual pricing of motor and home insurance. In this country the Central Bank is now investigating how dual pricing affects consumers by conducting a major study.

The move follows exposure in this publication of the malign impact of dual pricing, which prompted Opposition TDs such as Sinn Féin's Pearse Doherty and Fianna Fáil's Michael McGrath to take up the issue in the Oireachtas Finance Committee.

The Central Bank says it will consider a range of policy responses, including a ban on dual or differential pricing, if its review of the practice finds that insurance companies that use it are not acting in the best interests of their customers.

Director general of financial conduct at the Central Bank Derville Rowland said that the probe would seek to establish the affect of the practice on consumers while at the same time establishing the drivers of consumer behaviour.

She said that the review, whose outcome is expected to be published this year, would assess the extent to which these pricing practices lead to outcomes consistent with the Consumer Protection Code.

The best advice for consumers is not to get caught out by sharp dual-pricing practices.

Your best defence against it is to shop around and be prepared to switch.

Instead of doing the leg work yourself you could use a broker, as long as the broker represents a number of insurers in the market, and is not just calling itself a broker when in fact it is merely an agent for just one insurer.

So make sure to get your own back on high-charging insurers.

Irish Independent

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