Dáil debates

Wednesday, 17 February 2021

Insurance (Restriction on Differential Pricing and Profiling) Bill 2021: Second Stage [Private Members]

 

11:00 am

Photo of Gerald NashGerald Nash (Louth, Labour) | Oireachtas source

I welcome the Bill, although it is not the perfect product and requires additional consideration. It would be churlish of me not to recognise the significant contribution that Deputy Doherty has made in evolving policy on insurance in this country over many years. We support the intentions of the Bill. We appeal to the Government to drop its opposition to considering the Bill more immediately because there is an urgency to dealing with this issue for many thousands of people.

The daylight robbery of consumers in the insurance sector is well known. However, we know it is not a phenomenon unique to the insurance sector. It is a problem frequently associated with phone and broadband contracts, the mortgage market and utilities. That is why Labour's consumer protection Bill, which we published in December, focuses not exclusively on the area of insurance but also on other economic sectors.

Last December's latest interim report by the Central Bank highlighted what many others already know, which is that most insurance providers in this country apply some form of what we call dual pricing. Although this is shocking, it is not surprising given the repeated revelations about how the sector operates in this country.

The loyalty penalty involved in this insidious practice is particularly galling. It punishes ordinary customers, many of whom are older people, and demands that they pay more when the logic would suggest that, like in any other business, loyal customers ought to be rewarded, not punished. This is a perverse situation in the extreme. There is now clear evidence that the over-70s in particular are paying excessive prices for the renewal of their car insurance premiums, compared to other customers. They pay up to €1,000 more in some cases, where all other factors are equal. A recent survey frominsuremycars.ieshowed astonishing differences in prices, such as a 74-year-old and a 76-year-old with the same risk profile being offered both €534 and €1,594 to insure a Peugeot 208 1.2 l car in my constituency of Louth. There is something radically wrong when things like that happen.

Insurance companies have also been ruthlessly engaging in so-called price walking, wherein they incrementally increase prices every year for customers who automatically renew their policies. Not only are loyal customers and those who are unable to switch being repeatedly ripped off, they are also, in effect, subsidising the lower cost premiums of new customers, who are often better off and represent a rich untapped seam for the sector. Time and again we are told that competition in the market is always changing and that people always need to look at their options when renewing. In reality, most people simply do not have the time, the resources or perhaps the full knowledge to keep up to date with changing market products and various complex offers. This is usually the insulting best advice the State has to offer. It tells people to shop around because there is plenty of value out there and that it is up to themselves. For too long, the State has been missing in action on all of this.

As the Minister of State correctly pointed out, the programme for Government pledges to work to remove dual pricing from the insurance market but nearly eight months on we still have no concrete action. The recent action plan on insurance reform was a golden opportunity to put the industry on notice that this practice will finally be outlawed in this country. Another initiative, the reform programme, has long been an aspiration but is short on concrete action, with a final review due in September 2021 at the earliest and no timeline for legislation. How much longer should ordinary customers have to wait for basic consumer protection? That is the question most people are asking.

The Central Bank has been considering banning dual pricing since 2019, but what more is there to consider, given the evidence available to us? We already know that the practice of dual pricing is rife across the home and car insurance sectors and the most recent of many interim reports provided what one stakeholder aptly described as "No new findings". It has just allowed for more dithering and more delay, with insurance firms laughing all the way to the bank. What we need now is decisive action on dual pricing and radical reform of the insurance sector more generally. We should not have to wait until the third quarter of 2021, as is being proposed, to even consider legislating to decisively deal with something that the dogs on the street know is a problem. As Deputy Doherty pointed out, we are yet again playing catch-up. The UK regulator has made an important intervention in this space and in the US some 20 states have outlawed the practice. I remind the Minister of State that EU competition law is quite clear that a supplier is not permitted to operate dual pricing regimes. What makes Ireland so special? There should be no reason or excuse for delay. The answer is simple. Anyone renewing a policy should be offered at least the same price as any potential new customer and this insidious practice must be ended by law.

Despite the warnings and the evidence, we have a Government that repeatedly refuses to legislate and a regulator in the Central Bank that needs to be enabled to regulate. In its reports, the Central Bank has warned about "unintended consequences", such as a risk of stifling competition. Does having to switch companies each year to maintain a similar price for a similar product represent fairness or fair competition? This is not a problem unique to the insurance sector. There is a more fundamental issue at play here, which also relates to utility bills, phone contracts and mortgage policies, as the Labour Party alluded to in our Consumer Protection (Loyalty Penalty And Customer Complaints) Bill 2020. We are told time and again how much money we can save by switching and shopping around but let us look at the facts. Half of Irish consumers never switch their energy provider, less than one in four has ever switched their health insurance provider and under 3% of people switched their mortgages over six months in 2019. That is all. In 2018, just 0.03% of customers switched the bank provider of their current account.

There is a clear pattern here. Many people do not switch, not because they do not understand why they should or because they are lazy, but because switching is difficult, time-consuming and many people simply lack the time, resources or knowledge to keep up with complex financial products and offers. A series of ESRI studies have shown that financial literacy in this country is an issue; it is generally low. There is also a clear class bias when it comes to switching, with disadvantaged groups switching significantly less overall. The Government and the regulator expect citizens to be experts in insurance, mortgage and utility products while also working full-time, caring for their loved ones and dealing with all of the normal things that people have to do. In short, all of the burden should not fall on the ordinary customer. The State has a duty to the citizen. If the market cannot be trusted to deliver fair pricing and transparency, as it cannot in this circumstance, we have a duty to legislate and to regulate to tip the balance in favour of the ordinary citizen.

I welcome the thrust of this Bill. It is a welcome contribution and call to action to level the playing pitch for insurance customers. The rules of the game also need to be made fairer for consumers of other day-to-day subscription services that are routinely purchased. The sale, marketing and servicing of other products in the telecoms, utilities and financial services areas demand our attention too. Loyal phone, broadband and utilities customers often find themselves the victims of higher rates. As I said earlier, the Labour Party would see offenders in this space brought to heel and made to introduce standardised and regulated customer services approaches that their custom and business should demand. The shocking practices of, for example, Eir represent appalling levels of customer service. As we know, its customer service levels have driven customers demented. Companies must be made to handle customer complaints according to a regulated standard. As it stands, consumer protection law does not impose a general obligation on service providers to establish a system for handling customer complaints or to abide by their own procedures as laid down and commitments that they may have made if they do not have such a system in place. The Labour Party Bill would change that.

On the substance of this Bill, we cannot afford another year of aspirational promises of reviews, interim reports and further delays. We know the answer to this well-flagged problem. Some of the answers are contained in this Bill. Now is the time to act. We can support business and stimulate our economy by addressing these inherent problems in our insurance sector. This would make a huge impact on businesses' bottom line and assist them in the difficult days ahead for our economy.

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