Monday 21 October 2019

Pressure mounts on insurers to end the 'dual pricing' method that punishes loyalty

Pearse Doherty wants Central Bank to face committee. Pic Tom Burke
Pearse Doherty wants Central Bank to face committee. Pic Tom Burke

Charlie Weston and Shawn Pogatchnik

Pressure is mounting to ban dual pricing in the insurance market, after the UK regulator signalled an end to the controversial practice there.

Dual pricing uses big data to pick out clients who are unlikely to challenge renewal quotes, with these often being vulnerable customers.

The Oireachtas Finance Committee said vulnerable customers were being hit and punished for their loyalty.

The financial regulator in the UK said it was considering banning dual pricing there. In a report, the Financial Conduct Authority found that six million British customers were paying high prices, with many of them classed as vulnerable clients.

In Ireland, leading TDs accused Aviva, AIG and Zurich of using complicated big-data techniques to identify vulnerable customers and targeting them for higher prices. This is despite these people being loyal customers.

One TD said Aviva had admitted to the committee that it used dual pricing to hike the premiums of existing customers on renewal.

"You're taking advantage of consumer behaviour. The lesson here is loyalty is punished," Fianna Fáil finance spokesman Michael McGrath told the insurers.

He said at surgeries older people had shown him their premium and policy documents "and they're paying through the nose, and you are benefiting from that".

"Dual pricing is about identifying customer behaviour and punishing loyalty," Sinn Féin finance spokesman Pearse Doherty told the insurers.

He said people who renew the same policy would be penalised with a higher premium. "If you renew for five years straight, you'll pay on average 28pc more. And if you renew for 10 straight years you will pay 40pc more as a result of dual pricing."

He accused insurers of employing data specialists to identify "people who are less price sensitive… therefore we can charge an additional premium".

Mr Doherty has persuaded fellow committee members to agree to have the Central Bank hauled before the committee to explain why it is not clamping down on dual pricing.

But insurance industry witnesses insisted that discounts up front to attract new customers stimulated competition and averaged out over several years of a policy.

Insurers said the practice of offering discounts to new customers meant no net loss or gain to the industry or customers.

"It is not to generate profit, it is profit-neutral, it is to generate competition in the market and attract new customers," said Brian Mahon, chief underwriting officer at Aviva.

He disputed the claim that existing customers typically receive higher renewal quotes than those offered to new customers for the same cover.

Mr Mahon said a third of Aviva's renewal quotes to existing customers were higher than the existing premium. Another third were the same, and a third were lower.

UK regulator, the FCA, slammed the home and motor insurance markets for not working well for all consumers.

Customers who do not shop around are negatively affected by dual pricing.

The UK regulator found that all types of customers were affected, but noted that this includes one-in-three people who are potentially vulnerable.

It found that people who pay high premiums are less likely to understand insurance or the impact that renewing has on their premium.

Irish Independent

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