Insurance Companies Cashing in by Dual-Pricing on Premiums

IRL/GB


Insurance Companies Cashing in by Dual-Pricing on Premiums

Insurance Companies Cashing in by Dual-Pricing on Premiums


The Central Bank has been called on to ban dual-pricing of insurance policies. The regulator is being urged to act on these insurers as firms have been quoting inflated prices for year-two renewals.

Dual pricing is the practice of setting prices at different levels for the same product or service. This situation has come to the attention of regulators here after regulators in the UK began a clampdown on the practice, whereby insurers sign up new customers on artificially low premiums for the first year and then quote hugely inflated premiums to renew policies.

The FCA (Financial Conduct Authority) in the UK is concerned about how existing customers are being treated. The same carry on is going on in this country as well. Existing customers are being overcharged for their cover in order to fund the introductory discounts being offered to new customers? The answer is clearly yes - everyone knows that dual pricing in insurance has been around for years. The key question is whether it has gone beyond acceptable limits.

Predominantly this dual-pricing tactic is happening within the motor insurance. The practice has been described as a sinister attempt to exploit customers and play on their inertia or the fact that they will get complacent or lazy and just let their insurance policy renew and roll over automatically without shopping around.

Many customers do not realise that the renewal quote is often a try-on and they can often get a better deal after the first year if they scour the market. Dual-pricing is thought to be one of the practices that have seen insurance costs surge in the last few years. Dermott Jewell of the Consumers’ Association said dual-pricing was anti-consumer as it punished loyalty.
"It is an appalling practice. People should never automatically renew, especially when it comes to motor insurance, as they are likely to get a bad deal,"

"Insurers make a fortune out of you if you do nothing. You must check out other providers."

Over in the UK, the consumer protection regulator told insurance companies to stop discriminating against existing customers in favour of new business. Their Financial Conduct Authority said:
“Firms should not give long-standing customers less attention than new customers or treat them in a way which results in poorer outcomes.”

And broker bodies have put pressure on insurers and their members to ensure that new and existing insurance customers are priced the same way. Insurers are well aware that many people will not question the renewal quote and if they do question it, they will probably stay with the insurer and accept the quote out of laziness or apathy.

Experts are now encouraging consumers is to get a good broker or do the footwork yourself in order to get a better deal. Motorists should not tell insurers from whom they are seeking new quotes what they have been quoted from their existing insurers, as the quote would only be matched, not beaten, experts said.

So will the Central Bank regulator actually do anything about the Dual-Pricing in the insurance industry? Well, when asked if it had any plans to clamp down on the practice here, the Central Bank said it had no role in relation to either pricing considerations or competitiveness. Its role was to ensure that firms assess risks appropriately and offer motor insurance at a price that adequately takes into account the conditions prevailing in the market, such as increasing claims costs.

Insurance Ireland, the representative body for insurers, said it had no role in respect of the commercial decisions of any insurance company. Nobody seems to want to do anything about this, so the moral of the story is that it is vital for consumers to shop around.









IRL/GB