Seán Fleming (Laois-Offaly, Fianna Fail) | Oireachtas source

I move amendment No. 1:

To delete all words after “That” and substitute the following: "Dáil Éireann resolves that the Insurance (Restriction on Differential Pricing and Profiling) Bill 2021 be deemed to be read a second time this day nine months, to allow for greater analysis of the complex issues concerned following the publication of the Central Bank’s final report on differential pricing later this year; and for such considerations to be taken into account in further scrutiny of the Bill."

At the start of this debate it is important that the House understands what differential pricing is and that it exists across many sectors of the economy, for example, in mobile phone plans and in gas and electricity tariffs to name but a few. These are often found at different competing prices from multiple providers. Even the concept of a student discount or using a money-off voucher at a supermarket can be considered differential pricing. The Central Bank defines differential pricing in insurance services as customers with a similar risk and cost of service being charged different premiums for reasons other than risk and cost of service. Dual pricing is one subset of differential pricing and comes into play at renewal stage, where there is differentiation between new and existing customers.

Differential pricing, including where it arises in the insurance sector, also has positive aspects such as discounts provided to new customers or to those who bundle multiple types of insurance products, such as car and home insurance, with the one company. It helps to promote competition and can also encourage individuals to shop around across various providers. Of course, it is a practice that can also work against consumers who may not be in a position to price different options.

We will protect these vulnerable people. However, the Government believes that this Bill is not the correct solution at this time and, in particular, those who do shop around would be negatively impacted as a result.

I will make one point on all I have heard from all of the speakers so far, and it is something about which I remind people listening, which is that this legislation is about the restriction on differential pricing and profiling. The people who have moved this legislation know that there would be seriously negative effects for hundreds of thousands of people if this law were to pass. The entire debate coming from the people who propose this Bill speaks of dual pricing, not differential pricing. The legislation is about differential pricing, which can have both very positive and negative impacts, and the proposers know that. None of the scripts read here today have dealt with the issue of differential pricing. Every speaker spoke about dual pricing and omitted to talk about differential pricing because they accept the point we have made. If they had wanted to pass a Bill on dual pricing, they could have done so. They chose, however, to propose a Bill on differential pricing. Commentators and others may believe these are different issues but the proposers chose to pick one aspect that is not the subject of the Bill. Dual pricing is not the issue before us here today. It is one aspect of differential pricing and it would have been helpful to have had a debate and to have had the proposers talk about the benefits and downsides of differential pricing, which they chose not to do.

There is a consensus that insurance affordability and availability is a key issue for society and that such insurance reform is a priority issue for this Government. It is widely recognised that there is no single policy or legislative fix to remedy the costs and availability of insurance. Based on the programme for Government, we have set out a range of commitments with clear timelines to reform the insurance sector in Ireland, including reducing the size of personal injury awards, increasing competition through new entrants and enforcement, and improving transparency. We also want to minimise the need for costly litigation through reforming that system. To achieve a whole-of-government approach, a subgroup on insurance reform within the Cabinet committee on economic recovery and investment would be the most effective vehicle to drive the implementation of these commitments. This subgroup was formally established at the end of September 2020, is chaired by the Tánaiste, and includes the Ministers, Deputies Donohoe, McGrath, McEntee and O’Gorman, together with the Minister of State, Deputy Troy, and me. The subgroup published an ambitious action plan in December and sets out 66 actions to be achieved across Government.

Differential pricing is one of the many areas of reform to be dealt with as part of the Government’s action plan. In this regard the Central Bank is currently conducting a review of the differential pricing of the Irish private car and home insurance market, which is due to be completed in the coming months. In December, the Central Bank published an interim report showing that differential pricing is evident across both the motor and home insurance markets. An analysis of the interim report showed that the practice may include both benefits and drawbacks to consumers. It also suggested that there appears to be a penalty for some customers who remain with the same company and do not shop around or challenge their renewal premium, the so-called loyalty penalty. Firm conclusions and recommendations will be made when the Central Bank report is finalised. The Department of Finance will consider the outcome of the bank's report when further analysis is published and, in line with the action plan and programme for Government, we will act accordingly at that time.

Turning to the text of the Bill itself, it contains a number of issues I wish to highlight to the House which need to be considered in this context and which have not been mentioned so far. The Bill would legally prohibit insurers from offering discounts to consumers. This would mean any price discount, whether it relates to joint policies between partners, family discounts, young drivers, linked to new customers or for any reason, would be banned. Differential pricing would prevent insurance companies from overcharging but it would also prevent them from undercharging and giving discounts. Dual pricing is a separate specific issue which we will also deal with but it is not the subject of the legislation before us today. Differential pricing is, and this has been conveniently ignored. The scripts that we have heard today have not dealt with the Private Members' Bill as published and that is being discussed here today.

This Bill represents a considerable price control within the market and may adversely impact a number of customers rather than benefiting them.

In addition, it may discourage consumers from switching between insurance providers and prices would rise for some customers. I do not think this matter has been considered by the Bill, and it might reduce Ireland's attractiveness as a place to do business for insurers providing insurance to other EU markets from Ireland. Irish-authorised insurance companies currently write just under €80 billion worth of insurance, with more than two thirds of that figure being accrued outside of the State. Regarding non-life insurance policy premiums written, this type of business amounts to €21 billion each year. To put that amount into perspective, however, only €4 billion of that figure relates to risk within the Irish State and policyholders within the State.

The Bill, as drafted, will apply to all home and motor insurance policies written by insurance companies in Ireland, even where policyholders are elsewhere in the EU. This would severely reduce Ireland's attractiveness as a place to do business and, potentially, cost jobs in a part of the financial services sector which employs approximately 30,000 people across the regions. Linked to this, no other EU member state appears to have banned the practice to the extent this Bill is proposing, and we will have to await the view of the Central Bank of Ireland in this regard. Furthermore, the requirement imposed upon insurers to provide details on rating factors, use and pricing policies, as set out in section 4 of this Bill, would be a major deterrent to possible new entrants to this area.

In summary, we need to be careful not to give rise to consequences which would have a negative impact on the Government's intention to promote competition. In addition, the Bill must also be considered in respect of how it interacts with EU legislation. There may be a need to consult the European Central Bank, ECB, regarding the additional functions that could be given to the Central Bank of Ireland. All these elements need further consideration to ensure that Ireland is complying with its obligation as a member of the EU. Members of the House should consider that if this Bill is passed as it stands it has the potential to limit competition, increase overall prices for consumers and make Ireland an outlier in Europe in respect of how we deal with insurance.

It is for these reasons that the Government is proposing to reconsider the Bill in nine months. This approach will allow us to scrutinise the Bill further and provide the Central Bank of Ireland with sufficient time to produce its report on differential pricing. Also during this period, in my role as Minister of State with responsibility for this area, I will promote competition in the insurance market to bring forward other non-legislative measures to tackle the negative outcomes associated with the current context and which have been highlighted in the interim report. I already outlined my intention to continue to do this with the main insurance companies and Insurance Ireland.

To conclude, Government interventions in a market is important as insurance is an area which needs to be firm and carefully considered. The issues involved are complex and require targeted approaches, as laid out in the Government's action plan for insurance. Our priority remains the implementation of the plan and the Government's insurance reform subgroup will give this issue the priority it deserves. Any solutions brought forward by this House should be evidence-based and seek to protect the ability of all policyholders to get the best deal, whatever their circumstances.

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