Sunday 25 August 2019

Charlie Weston: 'Time to look at stripping Central Bank of its consumer protection role as people are let down again'

Sharon Donnery, acting governor of the Central Bank. Photo: Gareth Chaney Collins
Sharon Donnery, acting governor of the Central Bank. Photo: Gareth Chaney Collins
Charlie Weston

Charlie Weston

If the Central Bank is good at anything, it is good at avoiding taking action to benefit consumers.

This is despite the regulatory authority having a dual mandate of prudentially supervising financial firms and protecting consumers.

We are in the midst of an insurance crisis in this country, with the Central Bank's main concern focused on ensuring that they are adequately capitalised and not in danger of collapse. Financial collapse is something they came close to but thanks to remedial action, which involved bailouts in some cases, and massive increases in the premiums being paid by consumers and businesses, the insurers have pulled through.

However, consumers should not expect any thanks.

Instead the insurers here are back to making fat profits, as evidenced from the fact the main players admitted to juicy profit margins in excess of what they had projected to make when they appeared before the Oireachtas Finance Committee recently.

So it is all the more galling to realise that insurers are also not playing fair with the very customers who rescued them.

And the Central Bank is unwilling to do anything about it.

Several insurers in this market are using big data to segregate consumers into those who will bear a big price rise, despite being a loyal customer, and those who will not.

This is known as dual pricing and it is effected by use of what is known as price optimisation software.

These software packages use algorithms to separate out customers and identify those ripe for predatory pricing, so-called dual pricing.

This is why some people get crazily high renewal quotes on the likes of their motor insurance cover when official statistics say motor and home insurance rates are falling.

Customers identified as savvy get fairer prices.

And the Central Bank here does not want to know.

It claims it has no function with regard to pricing of insurance.

This publication put a series of questions to the Central Bank.

It was asked if it is satisfied itself that insurers are compliant with the Consumer Protection Code when they penalise renewing customers for their loyalty. It was asked if it has satisfied itself that insurers' dual-pricing policies are fair, something required by the code.

It was also asked if it has satisfied itself that insurers' dual-pricing policies are in the best interest of customers, which is again something demanded by the code.

The questions were responded to with a general statement which skirted around the issue.

Pressed repeatedly about dual pricing being a consumer protection issue, the Central Bank refused to yield.

This is particularly disappointing as the British authorities are taking action on dual pricing.

It goes to show yet again that our Central Bank is just not interested and not up to the job of protecting consumers.

Its dual mandate of prudential supervision and consumer protection cancel each other out, with the consumer losing out time after time.

That is exactly what was happening with the €1bn tracker rate scam until the Central Bank was embarrassed into taking the issue seriously.

What all this means is that it is time we looked again at stripping the Central Bank of its consumer protection role and giving it to an agency that will do the job.

Otherwise we will just have to accept that consumers and businesses are going to continue to get kicked around by dual-pricing insurers.

Irish Independent

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