The Central Bank has warned that insurance companies are charging some of their customers unfair prices.

The first phase of the regulator’s review into differential or dual pricing practices has found that most insurance firms are using differential pricing techniques.

Differential pricing involves charging customers with the same risk profiles different rates.

A common way to put the practice into use is to offer new customers better rates than those who are renewing their premiums – penalising those that fail to shop around.

"Absolutely damning"

In a statement, Sinn Féin Finance Spokesperson Pearse Doherty said he would introduce legislation aiming to make the practice illegal.

“What the Central Bank have uncovered during the initial phase of their investigation is absolutely damning and is of such concern that they have communicated to the CEOs of all insurance firms instructing them to implement immediate requirements on foot of their findings,” he said.

“The Central Bank have confirmed that the insurance industry uses pricing methods that punish loyal customers and harm vulnerable and low-income groups.

“Today’s findings expose the insurance industry. They have been caught red-handed, having come before the Oireachtas Finance Committee last year claiming that there was nothing to see.

“There is only one way to regulate this practice and that is to ban it, as has been done in several States in the US. That is what I intend to pursue through legislation. It is time to end the insurance rip-off.”

Central Bank

The Central Bank has written to Ireland’s insurance firms asking any that believe they are not using differential pricing to clearly outline how this is so.

It also asked the companies to take responsibility at board level for the impact of the practice on their customers and to implement a consumer protection risk framework.

Central Bank Director of Consumer Protection, Grainne McEvoy said: “The primary objective of this Review is to ensure that customers are being treated fairly, given the increasing sophistication of big data and modelling techniques within the insurance industry.

“While work on the Review is ongoing, the issues we identified during our evidence-gathering phase are of sufficient concern that we are requiring action now from relevant firms.

“For this reason, we have written to firms instructing them to implement the Central Bank’s requirements with immediate effect.”