Loyal customers overcharged for insurance should start to see prices fall under new rules

Loyal customers of insurance companies who have been overcharged for years should start to see reductions in the cost of renewing premiums from Friday as a new regulations banning so-called “price-walking” comes into force.

The measure is part of broader efforts to reform the insurance sector being spearheaded by Minister of State at the Department of Finance Seán Fleming.

In an interview with The Irish Times, he rejected a claim by Sinn Féin’s Pearse Doherty that government actions in the area were “too often progressing at a snail’s pace” as the Fianna Fáil TD outlined a series of measures designed to cut insurance costs for households and businesses.

This includes legislation on rebalancing the duty of care between a premises owner with personal responsibility of members of the public, which will be debated in the Dáil on Friday.

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Mr Fleming said the “only hold-up” to savings already being made by insurance companies due to reduced personal injury awards in the courts being passed on to customers were legal appeals at the lower sums being awarded to plaintiffs.

The practice known as “price-walking” or a “loyalty penalty” is banned from today, and the Central Bank is tasked with reporting on its implementation in the sector.

Central Bank research found that customers who stayed with their insurance provider for nine years or more were paying on average 14 per cent more for car insurance and 32 per cent more for home insurance.

Under the Central Bank regulations companies will still be able to offer discounts to new customers but they can no longer add arbitrary costs to existing customers that don’t contact them to query increased premiums.

Mr Fleming said: “It was sharp practice. Most people feel you should get a loyalty bonus for being loyal to a particular company. They actually took advantage of the people and gave them the opposite of a bonus ... because they knew they weren’t going anywhere.”

Mr Fleming said reductions to premiums of people impacted by the practice “should start happening promptly” from July.

Under the rules insurance companies will not be required to tell customers the reason for the price reduction and there is no comeback for people who feel they have been subject to price-walking.

On this Mr Fleming says: “This process is forward looking. It’s not retrospective. Straight up on that.”

Sinn Féin has raised concern that the ban will only kick in for new customers on the second renewal, with Mr Doherty saying companies could “dodge the ban” by front-loading an increase on the first renewal quote.

Mr Fleming says customers who feel they are being overcharged in the first renewal should “make a phone call or go online” to challenge the quote and perhaps confront the company with a cheaper quote from another company for it to match.

“That’s actually what has to happen,” Mr Fleming said.

The Minister of State said the next priorities under the Government’s insurance reform action plan would be to provide for mediation facilities at the Personal Injuries Assessment Board (PIAB) with the goal of preventing more cases going to court as well as duty-of-care legislation.

Mr Fleming characterised the latter as relating to “slips and trips”.

He said: “If you’re walking along the street, or in a shop on your mobile phone and you walk into a pillar ― it ain’t the pillar’s fault.”

Mr Fleming also said there was a duty on every property owner not to be careless or reckless.

He said the injured party traditionally had the sympathy of the courts, especially if an insurance company was involved, and it was the “single biggest issue” of concern to businesses.

Mr Fleming said he believed the legislation “will change the whole tone of the industry, together with the reduced awards”.

He said it should result in fewer claims and those that did go through would get a “more realistic settlement”.

*This article was amended on July 1st, 2022