The dual-pricing rigmarole has plagued motor and house insurance customers for years. Now it seems that long-standing customers will no longer be punished with higher prices as there will finally be recognition for loyal policyholders who don’t want to switch.
ual pricing is where insurers use algorithms and other big data techniques to identify vulnerable customers who are unlikely to shop around at renewal time.
They are hit with premium hikes every year.
Many of these people wrongly believe that the renewal quote they get is an accurate reflection of the risk they pose to the insurer, instead of being a blatant try-on.
The data tells the insurer these people are unlikely to challenge the higher premium, so it is incrementally increased every year.
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This is known in the industry as price walking, or price warping. If you are loyal to an insurer and your premium is price-walked for years, you could find your motor cover ends up €700 or €800 dearer than the same insurer is prepared to offer a new customer presenting a similar risk.
Not surprisingly, it is the older and the less financially savvy who get caught on this price-walking aspect of dual pricing.
Now the Central Bank is to recommend that insurers stop the practice of price walking premiums, or incrementally raising rates every year for customers who stay with them.
If it is accepted and implemented by the Government, it will mean insurers will no longer be able to punish loyalty with higher prices.
But crucially, insurers will still be able to offer discounts to attract new custom.
This will ensure switchers continue to get rewarded, and to avoid a disincentive for new insurance players coming into this market.
So switchers will continue to nab the best deals, but long-stay customers may get the likes of a loyalty bonus to stop the gap being too wide between new and existing customers.
This is close to the approach taken by the UK regulator, the Financial Conduct Authority.
It comes after this publication has been campaigning for years against discriminatory dual pricing.
Insurance companies have all denied in the past engaging in dual pricing, but the Central Bank has found in recent reports that price walking is rampant in the industry here.
At the start of the year, Sinn Féin’s Pearse Doherty had legislation banning dual pricing pass a number of stages in the Oireachtas, but the Government put a nine-month stay on the bill.
Now it looks like there will be no action. By the beginning of next year, we could reach the end of the road for the immoral practice of price walking loyal customers into paying too much.