Customers with the longest tenures are paying the most for insurance, according to market analysis

Customers in Ireland who have stayed with their car or home insurer the longest are paying the most for their insurance coverage, according to Ireland’s financial services regulator the Central Bank of Ireland.

The Irish regulator this week published its Interim report on its review of differential pricing practices in the Irish private car and home insurance markets. This found that “dual pricing is evident” across these sections of the market and that customers are charged different premiums for reasons other than risk and the cost of service.

The interim report reflects the second phase of the Central Bank’s review into differential pricing, which was kickstarted following a ‘Dear CEO’ letter that was published on 9 September.

The market analysis conducted as part of this identified a number of pricing practices which “led to customers with a similar risk and cost of service paying different premiums for reasons other than risk and cost of service”.

Ultimately, customers with the longest tenure with their insurer also end up paying the most for their insurance, especially as the majority of insurers were found to implement some form of differential pricing.

The Central Bank also discovered that “insurance providers failed to demonstrate consideration of how these pricing practices may impact certain groups of consumers differently and the potential for certain consumer groups to be impacted more than others”.

In addition to this market analysis, the Central Bank has also conducted consumer research using in-depth interviews and focus groups. This found:

  • “Consumers tend to show a clear preference for staying with an existing insurance provider. Often, consumers compare prices with other insurance providers to help to negotiate a better price with their current provider, rather than switching.
  • The complexity of insurance means most consumers have a limited knowledge of how insurance operates. This leads to less involvement and a tendency to believe it is easier to stay with a current provider rather than switch.
  • Consumers are aware of the legal requirements associated with insurance. However, as consumers do not see it as a discretionary purchase, it is frequently considered in largely negative terms. This results in both a lack of trust and lack of interest. Private car insurance is considered more involving, while there is a higher level of inertia towards home insurance.”

The research project is still ongoing – the regulator plans to conclude the review and publish its resulting findings and recommendations next year.

Derville Rowland, director general of financial conduct at the Central Bank, said: “We are undertaking a deep-rooted and forensic review of differential pricing practices in line with our mandate to ensure that the best interests of consumers are protected.

“This interim report summarises our initial observations and these will help inform the next phases of our work.

“Along with our market analysis of the insurance providers’ practices, it was important that our review included consumers’ voices and experiences, so we engaged directly with consumers to ensure that their voices inform our work.

“As differential pricing can be associated with some benefits for consumers, as well as costs, these insights will be essential to our overall analysis and help us determine upon completion of the review the most effective measures to protect consumers.

“In the interim, our supervision of insurance providers will continue to ensure they implement the necessary requirements to address the concerns we set out in our recent industry letter.”