The Central Bank has introduced a ban on 'loyalty penalties' used by insurers in an effort to bring "fairness" to customers.
The ban, which is due to come into effect from July 1st, will mean that companies will no longer be allowed to charge higher premiums to loyal customers providing the risk to the insurer stays the same. The practice is also known as price walking.
The ban will come into effect on July 1st and will cover motor and home insurance.
However, the Central Bank has said that to support competition and switching, new customer discounts will be allowed.
The ban comes as the Central Bank recently revealed that loyal customers of nine years could expect to pay 32 per cent more than new customers for home insurance.
Furthermore, insurance undertakings and insurance intermediaries will be required to carry out an annual review of motor and home insurance pricing policies and processes to ensure sound practices.
Director general of the Central Bank, Derville Rowland commented: “Financial services providers are responsible for providing products that meet their customers’ needs fairly.
“We have consistently stated that we will intervene where we have reason to believe that unfair practices are occurring that take advantage of consumer behaviours and habits, and we will prioritise the interests of consumers over the behaviours and conduct in firms.
“These new regulations will significantly enhance the consumer protection framework. This will benefit consumers by removing the loyalty penalty for consumers of long tenure while preserving competition in the market.
“The publication of these measures does not bring to a close our consumer protection work in the insurance sector.
“We will continue to engage with insurance providers to ensure work in relation to oversight of pricing practices is undertaken.
“We will monitor developments in the private motor and home insurance markets to better understand customer engagement in the market and how it might be improved and to ensure that firms are acting in the best interest of consumers and delivering fair outcomes.”
