Central Bank Differential Pricing Regulations May 2022
The Central Bank’s (the “CBI”) ban on differential pricing in the home and private motor insurance will take effect with the implementation of the Central Bank (Supervision and Enforcement) Act 2013 (Section 48(1)) (Insurance Requirements) Regulations 2022
(the Regulations), on 1st July 2022.
Differential pricing is the practice of charging customers different premiums for reasons other than risk and cost of service. After a comprehensive review conducted by the CBI into the practice, the Regulations introduce key requirements for insurance undertakings and insurance intermediaries when selling motor and home insurance policies to consumers as follows:
- Price walking: a ban on the practice known as “price walking” in motor and home insurance is effective from 1st July 2022. From that date, insurance undertakings and insurance intermediaries will not be permitted to charge consumers, who are on their second or subsequent renewal of a home or motor insurance policy, a premium higher than they would charge equivalent year one renewal consumers. However, it should be noted that to support competition and switching, new customer discounts will be allowed.
- Pricing practices and processes: insurance undertakings and insurance intermediaries must carry out an annual review of their home and motor insurance pricing policies and processes to ensure sound practices. Such reviews should confirm that they do not systematically discriminate against consumers based on tenure or systematically exceed the price charged to first time renewal consumers in respect of renewals for longer tenure consumers. A written record of the review is to be maintained and actions taken to review any deficiencies identified.
- Auto-renewal: from 1st October 2022, insurance undertakings and insurance intermediaries must allow consumers to cancel auto-renewals of non-life insurance policies free of charge at any time during the duration of the policy and inform consumers of that right. This includes written consumer consent for the automatic renewal of insurance contracts.
The CBI also intends to address specific additional problems in relation to complaints resolution, vulnerable customers and customer transparency as part of the overall review of the Consumer Protection Code (“CPC”) due to concerns that firms are not classifying, categorising and recording complaints appropriately. A consultation on the CPC review is expected to be launched in Q4 of this year.
Firms impacted by the above requirements should ensure they familiarise themselves with the Regulations to ensure non-life policy documentation provided to it by an insurance undertaking or intermediary accurately reflects the new position.
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to discuss any aspect of the Regulations which may impact your firm’s practices and processes.