Wednesday, 17 February 2021
Insurance (Restriction on Differential Pricing and Profiling) Bill 2021: Second Stage [Private Members]
I move: "That the Bill be now read a Second Time."
Lé tréimhse ró-fhada anois, tá na comhlachtaí árachais ag cur costas ró-mhór agus míchóir ar thiománaithe agus ar úinéirí tithe. Tá sé seo ag tarlú bliain i ndiaidh bliana. Tá an Bille seo chun é sin a athrú. Tabharfaidh sé tús áite do thiománaithe agus d'úinéirí tithe, a bhfuil árachas acu, ag laghdú costas. Tabharfaidh sé ar comhlachtaí árachais a gcuid cleachtais a mhíniú. Cuirfidh mó Bhille deireadh le déphraghsáil, cleachtas ina bhfuil a fhios ag comhlachtaí na custaiméirí atá níos toilteanaí athnuachan a dhéanamh ar pholasaithe agus dá bharr sin, gearrtar praghsanna níos airde orthu.
Today is the day for this Dáil to end the insurance rip-off. Today is the day for this Dáil to put consumers first and send a clear message to the insurance industry that the game is up in respect of exploitative practices in home and motor insurance. For too long, the insurance industry has been able to price-gouge its customers. Most people believe their insurance premium is based on how likely they are to make a claim and how much that claim would cost their insurer, but that is not the whole story.
Last November, the Central Bank found that insurance prices had risen by 35% in the past decade despite the cost of claims falling by 9%. All present know that insurance companies are engaging in a price-gouging practice known as dual pricing which they use to charge customers much higher prices than the actual cost of their policies. It involves the use of complex models to identify customers who are likely to renew and then charge them the highest prices possible before they are tempted to switch to a competitor. Instead of rewarding customers for their loyalty, the companies increase the customer's premium in the knowledge that he or she is more likely to renew than to switch. That is the loyalty penalty.
I refer to the case of Ray, for example. He received a renewal quote of €1,420 from Liberty Insurance for his car insurance, only to be offered a premium of €680 for exactly the same policy with exactly the same provider when he went online.
He was overcharged by 109% or €740. That is the loyalty premium that we, in this House, are going to ban.
In September 2019, I wrote to the Governor of the Central Bank requesting an investigation into the practice of dual pricing, and after meeting with the Governor, the Central Bank agreed to carry out an investigation into the complaint I submitted. In January 2020, the Central Bank began its investigation, and its interim report in December confirmed what we had said in our major complaint, that is, dual pricing is endemic right across the insurance market, affecting more than seven in ten Irish policyholders, many of whom are overcharged by hundreds of euro every year.
While the insurance industry has been allowed to rip off Irish customers, action has been taken elsewhere. Between 2014 and 2017, 20 US states prohibited the practice of dual pricing, including California, New York and Florida. These bans were recommended by the American Association of Insurance Commissioners, which found that the use of dual pricing unfairly discriminated and called for the practice to be banned. The association stated that "two insurance customers having the same risk profile should be charged the same premium for the same coverage". That is the principle of fairness on which this legislation is based and built.
The Financial Conduct Authority, FCA, in Britain began its own investigation into this practice in 2018. It published its final report in September. Its findings were stark and its solution was clear, that is, to ban dual pricing. The British regulator found that in 2018 alone, dual pricing resulted in 6 million policyholders being overcharged a combined €1.4 million. It also concluded that dual pricing distorted competition. While others, including the industry and, unfortunately, the Minister of State with responsibility for insurance, have argued that a ban on dual pricing would undermine competition and deter new entrants, the British regulator, the FCA, found the opposite to be the case, that this type of price discrimination has a negative effect on competition while removing dual pricing would improve the nature and intensity of competition. For the benefit of the Minister of State, I will quote the FCA, "This would mean firms competing in a more effective and innovative way, which should lead to lower overall costs for supplying insurance, more intense competition and ultimately lower average prices paid by consumers." The British regulator has responded by announcing it will ban dual pricing this year. Irish consumers deserve no less.
This Bill will ban price gouging activity. It will ban dual pricing by requiring insurance providers to use only rating factors directly linked to the risk to be insured so that renewing customers can no longer be charged artificially high prices based on their likeliness to renew, their economic background, their spending patterns or any other trait not linked to risk. It will increase transparency in how a customer's premium is priced. Whenever a customer receives a quote or premium from an insurance company, the insurer will be required to tell the customer the rating factor used to calculate the price and how much of that price is to cover the expected cost of claims, how much is to cover the cost of servicing and how much is to feed the profits of insurance companies. This Bill will ensure that transparency.
Crucially, the Bill will empower the Central Bank to draw up the regulations that will govern this ban, using the expertise of the Central Bank to remove this practice from the insurance market. Some in this House may have concerns that the Central Bank, not the Dáil, is best positioned to determine how dual pricing is removed from the insurance market and this legislation answers those concerns. It will require the Central Bank to produce a code of practice which will assist the courts and the Financial Services and Pensions Ombudsman where an insurance company has broken these new laws. The Central Bank will be required to publish an annual report, assessing the industry's compliance with the legislation. Where an insurance company continues to use price gouging practices against customers, the Central Bank will have the power to sanction them.
The legislation will reduce prices for consumers who for too long have been ripped off by the insurance industry. The FCA found that a ban on dual pricing in the British market would bring real benefits to consumers, saving them between €4.8 billion and €12.9 billion in the next decade through lower prices.
Using a data set of 17 million observations across 6 million unique insurance policies, the FCA has modelled what a ban on dual pricing would look like. It has found that a ban on dual pricing would reduce insurance premiums by up to 27% for homeowners who renewed up to ten times and up to 34% for motorists who have renewed for a similar tenure. This legislation provides for the same remedy to ban this price gouging practice. Its effects would be the same, that is, a reduction in prices for Irish consumers. The Minister of State has again claimed that the legislation would prohibit discounts on insurance. Let me be clear: he obviously does not understand the legislation or the price remedy to be introduced here or what is happening across the water, on which this legislation has been built. It will do no such thing. This legislation addresses the discriminatory practices of the insurance industry in the digital age.
As the International Association of Insurance Supervisors has warned, the growing use of complex algorithms and the rapidly expanding ability of insurers to access more data creates risks for consumers. It demands a response from legislators and regulators. As the association noted in an issues paper in March 2020, pricing algorithms are being applied to new sources, including online media data such as web searches, online buying behaviour and social media activity accessed from third party sources, which includes search engine providers such as Google and social media platforms such as Facebook. This reality was also underlined by the European Insurance and Occupational Pensions Authority, EIOPA, the European regulator, in 2019 when it noted in a thematic review that firms are using new data sources for pricing and underwriting, including web searches, online purchases, social media activities, job career information, and bank account and credit card data accessed from third party sources.
That is the vista before us. The question is whether this is ethical or transparent. It is definitely not. This legislation responds to the risks posed by pricing models that discriminate and use personal data without the knowledge of consumers. This legislation will ban dual pricing, end discrimination and bring transparency to the setting of prices. It will radically shake up the insurance market and do so for the better. It will increase competition and reduce the time and money customers spend switching. Crucially, it will reduce prices. This legislation will require the insurance industry to do what should be a given, that is, to price fairly and transparently.
I welcome the fact that the Consumers' Association of Ireland and Brokers Ireland have supported the legislation. I also welcome the fact that the Government is not opposing the legislation, but I am disappointed that it is putting a stay on it for nine months. While the Government may delay this action, it will not hold it back.
I thank my Sinn Féin colleague, Deputy Doherty, for the painstaking work he has done in taking on the insurance industry. He has done this in a hostile environment where those who fiercely defend the status quoallows the insurance industry to dictate how much and how often it demands money from policyholders. Unfortunately, this has been facilitated by compliant governments that have adopted the role of spectator rather than legislator. Insurance is a legal requirement. Preventing policyholders from being robbed should also be a legal requirement.
Today's Bill provides the opportunity for Fianna Fáil, Fine Gael, the Green Party and others to stand up to the vested interests in the insurance industry. It is time to make a stand for drivers and for homeowners who are being fleeced by price gouging. Many of these are their elderly constituents or those who are already marginalised because they do not have the technological know-how, time or broadband connectivity to shop around. They are depending on us to stand up for them by demanding transparency and fairness in the insurance industry. They are depending on us to end the rip-off and wrestle the raw data from those who have fought so hard to protect the system that enables insatiable greed to run riot.
When I was on the Joint Committee on Finance, Public Expenditure and Reform, I remember Dorothea Dowling fought so hard to get this raw data. Dual pricing is just one of the practices that allow this greed to use the information on policyholders to extract the maximum amount of money from hard-pressed individuals and families. A fundamental reform of the insurance industry is long overdue. This Bill is another step by Sinn Féin in the right direction.
Leave the party politics behind for today and put our constituents first. It is time to abandon dual pricing.
I commend my colleague, Deputy Pearse Doherty, on tabling this legislation and for his tireless work on this issue to date. Since this Bill was introduced last month, I have been contacted by countless people in my constituency, Longford-Westmeath, where just last week a business owner had to take a High Court case to make sure that his insurance provider paid out on a policy. What I hear from constituents is the same across the board. They feel unfairly penalised, ripped off and that the lack of transparency in insurance policies is designed to inhibit them and to protect the insurance provider.
The grossly unfair practice of dual pricing by insurance companies must end. It is already banned in other jurisdictions and people here are entitled to that same level of protection and clear and transparent information. The practice of insurance providers penalising existing policyholders and charging them hundreds of euro extra compared with new customers must also end. Customers can clearly see this. It is freely available on the insurance providers' websites. If a person puts in his or her details as a new customer, the price offered is very different. There is no reason for the extra charge to be applied to them except for price gouging.
Providers must calculate premiums based only on the likelihood of a claim and nothing else. Any adjustments must be clearly explained to consumers. Insurance companies must use the same factors to calculate new and renewed premiums. This is nothing new for other businesses. There is no reason the insurance industry must be held to a different standard. It must value and respect consumers who have stayed with it, often for years on end, but it does not. I refer to a specific instance. An individual in a rural town in my constituency had his insurance premium increased by more than €1,100 in a year, which was not reflected when he went in as a new customer on the website.
The Central Bank must be able to enforce regulations to govern the ban. The code of practice needs to be drawn up and it has to be fit for purpose for the Financial Services and Pensions Ombudsman and for the Courts Service. The Central Bank must be given powers to sanction insurance companies that continue to use dual pricing and to rip off consumers.
I commend Deputy Pearse Doherty on his work on this Bill and his tireless work in holding the insurance industry to account. It is in stark contrast to what this Government and previous Governments have done with the insurance rip-off that we have experienced across the length and breadth of the country. Young drivers have been punished over recent years and it is an ongoing problem.
This particular issue sees people being punished for their loyalty. When they remain with a company and are loyal to that company, they are price-gouged. It needs to be dealt with and this legislation deals with it. I spoke to a constituent this week. He told me that his insurance was €785 when he got the price for renewing it, yet he went on the website and it was only €550. He drove only 22% as much as he would be in a normal year, because of the lockdown. His argument was that surely his insurance, and the insurance of everybody, should have gone down because if people are not on the roads and not driving as much, then there will clearly not be as many accidents or claims, yet the insurance industry has pushed prices up. It is a scandal. I heard the Minister on the radio this morning, claiming that this legislation was somehow going to do the opposite and put insurance companies in a position where they would not be able to give discounts. They do not give discounts. They assault people to get more money out of them for a service they have provided previously.
We need the Government to step up to the mark, not just for this legislation but for the whole insurance industry. We need to deal with this in the round. Ireland has a reputation across the world as being a country that is overpriced across many sectors, especially the insurance sector. I welcome that the Government is not going to oppose this legislation. However, putting a stay on it is like putting a stay on people trying to do better. We cannot allow the insurance industry to continue to punish people for doing the right thing.
I appeal to the Minister of State to withdraw the amendment, to deal with this issue right now and to sort out people's problems with regard to insurance across the country.
I commend Deputy Doherty on the work he has done in this area over a long period of time. These are not new issues. The issue of dual pricing and price gouging has been with us for a long time. These are very unfair and, in fact, toxic practices that have been carried out by greedy insurance companies for a long time. Deputy Doherty and others have shone a spotlight on this issue for months and years but the reality is that the Minister of State's Government has done nothing. Customers are being ripped off every single day. Car insurance customers, home insurance customers and small businesses are being ripped off. In fact, a number of such businesses had to take insurance companies to court because the Government failed in its duty to protect them and to protect citizens. People tell me all the time that they are being ripped off and ask me why the Government does nothing. It is because the political will is not there and because the Government is protecting and shielding the greedy insurance companies. People increasingly tell me that unless and until we have a Minister for Finance like Deputy Doherty, we will not see change on these issues.
The reality is that this can be resolved with political will. Over recent weeks and months, the Tánaiste has posted a number of videos on social media in which he beats his chest and says that he will take on the insurance industry and deal with some of these issues. Where is he today? Where is the Government today? Where are Fine Gael and Fianna Fáil today when they are putting a stay on this Bill, which could actually deal with these issues here and now? They want to kick the can down the road again. People will see that and they will see why. It is because the Government does not want to challenge the greedy insurance companies.
Any number of people are being ripped off every day. The Minister of State knows this because evidence has been presented time and again by an Teachta Doherty, by the Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach, and by many consumer organisations. These people feel badly let down by Government parties that are simply not prepared to put the interests of ordinary consumers, customers and citizens first and are taking a back seat and allowing those people and small businesses to take court cases and to lead the charge, along with people like an Teachta Doherty, while the Government sits back and does nothing. It is unacceptable. The Minister of State should support and back this Bill.
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.
I also commend my colleague, Deputy Pearse Doherty, on bringing this Bill before the House and on having it in him to take on the insurance industry and calling stop on the insurance rip off. I will pick up on something the Minister of State said. He has chosen to engage in semantics, instead of dealing with the extensive research on this price-gouging practice. Dual pricing, differential pricing and price optimisation refer to the same practice. I am very disappointed by the Government’s amendment, which is kicking the can down the road. I did not hear the Minister of State talk about the reality here. A reality check is needed here because drivers are being forced to pay these high prices, when in rural Ireland in particular there are simply no other options other than to drive for essential journeys.
Dual pricing is wrong and it must be banned. It has been banned in other countries and this must be done here also without delay. What other industry targets customers for being loyal? It is working out well for them because the insurance business is one lucrative business. There is no denying this practice is happening, and we need the Government to step up to the mark to deal with this issue immediately, rather than simply kicking the can down road. One man told me that he just got his car insurance renewal quote. One company quoted him €1,525, another company quoted him €749 and another €540. Is there any reason to that? Of course there is not, it is just a handy way for the big insurance companies to make a profit on the back of ordinary workers and families.
The reality is that the costs are extortionate.
A woman contacted me to tell me that her daughter is learning to drive and she said:
We’ve been trying to get our daughter insurance quotes as a new driver. We may as well not bother. Who has €5,500 to insure their child as a provisional driver to get experience? Even when she passes her test it doesn’t get much cheaper, it is €3,500. How on earth can insurance companies justify their prices?
Is Bille fíorthábhachtach é seo atá curtha os comhair na Dála inniu. Tá sé thar am dúinn déileáil le déphraghsáil. Níl tionscail ar bith eile ann a ghearrann pionós ar chustaiméirí mar go bhfuil siad dílis do chomhlacht. Ní cóir go mbeadh sé de chead ag comhlachtaí praghas amháin a lua ar an bhfón agus praghas iomlán difriúil a thabhairt nuair a dhéantar fiosrúchán ar líne. Caithfear rud éigin a dhéanamh faoi seo. Impím ar an Rialtas tacú leis an mBille seo.
I commend my colleague, Deputy Doherty, on bringing forward this very important Bill on the overcharging, on a systematic basis, by insurance companies. While there may be claims to the contrary, it is without doubt that the vast majority of insurance companies operating in Ireland use dual pricing or differential pricing. The loyal customers who do not shop around for better prices see their premiums increase year on year at renewal time, despite having no claims for the previous year. While everybody is encouraged to shop around to get the best price possible for their insurance premium, it is a headache to have to do it. It takes time and requires making countless phone calls or going online to fill in the information on various websites, which is not always an option for people who do not have access to a computer or are not computer literate. Insurance companies are taking advantage of people who do not shop around, primarily older people who have been loyal customers for years. Just because they do not check prices, it is not a fair way to treat people. The practice of dual pricing must end.
Different customers with similar risk and cost of service profiles are paying different premiums for reasons other than risk and cost of service. This is happening with car and home insurance. Insurance customers are being discriminated against and put at a disadvantage when trying to renew their insurance with companies that use the dual pricing method. It is obvious that insurance companies are thinking of their own profits and not thinking of the welfare of their customer base.
Many customers do not understand how insurance operates and they tend to do what is easiest without looking at what is the best value. The insurance companies know this and take advantage. Studies have found that there could be a difference of up to €1,000 in prices quoted to the same person and for the same car, which is ridiculous. Another study on home insurance shows the average premium charged was 29% higher for renewal business than for new business, despite the expected cost of renewal business being 6% lower than the cost of new business.
There is clear evidence that customers are punished for loyalty and that the longer a customer stays with an insurer the higher the amount they pay in excess of what is required to cover the expected cost of the policy. Customers are not being put at the centre of pricing decisions, which is basically exploitation. It is about using vulnerable people to make money out of them. Dual pricing must end.
I thank Deputy Doherty for bringing forward this much needed Bill to the House. It is long overdue and will be welcomed by all civil and fair-minded people. For far too long, this dual pricing could be practised through deceitful and cunning methods designed for nothing more than cream-skimming off the backs of motorists and home owners. It wilfully discriminates against clients through the use of big data such as: a postcode; where the person does his or her shopping; how many addresses the person has had previously; the person's sex, age and gender; the person's education; the person's Facebook likes; and the use of the person's personal credit card. These are but a few of the cream-skimming techniques used by insurance companies to form personal discriminatory judgments and to charge maximum insurance premiums. Not one of these criteria has anything to do with safe driving or home insurance. No Government should be seen to support or be part of such price gouging. This is exactly what we are dealing with here and exactly what one is agreeing to if this Bill is rejected.
We should not have to wait for a Central Bank report to tell us what every ordinary person already knows and what every motorist in the State knows. This malpractice must be stopped and this Bill will do just that. It will protect the vulnerable, it will bring transparency to premiums, it will protect the bona fide insurance brokers, and it will put money back where it belongs, which is in the hands of struggling families.
I am aware that every homeowner and motorist in Wexford will welcome the passing of this Bill, and so will their counterparts in every county in Ireland. This is about putting hard-earned cash back into the pockets of struggling families who are being overpriced and ripped off by the unscrupulous methods of telematics, or in ordinary terms "big data".
I will give a prime example of an 88-year-old pensioner from Wexford. He uses his car only to do some short journeys such as going to mass and for errands for his neighbours in a small village. He was quoted €950. This man does not understand computers.
His son went online for him resulting in a quote of €550, which was a reduction of €400 or 42%. This 88-year-old pensioner was lucky to have his son to help him; otherwise, he would have had to pay €950. This is just one small case in many rip-off cases that this Insurance (Restriction on Differential Pricing and Profiling) Bill 2021 will put an end to. I urge all Deputies and Senators to support this Bill and give struggling families a break.
I also thank Deputy Doherty for his absolute determination to challenge this industry and his consistency in defending all of us who have car and home insurance, especially those who are older and vulnerable. I listened incredulously to the Minister of State's speech. He talked about underpricing and overpricing as if an insurance company would ring somebody up and offer them a product on which it would lose money. I am absolutely incredulous that he stood here in this convention centre and said something like that. The Government is talking about kicking the can down the road and protecting insurance companies over their customers.
It is important to outline what is being proposed. We propose to ban the use of dual pricing in home and motor insurance; require insurance companies to inform consumers of the rating factors they have used to calculate their premiums and the amounts to be paid as a result of each rating factor; require the Central Bank to draw up and enforce regulations to govern the ban; require the Central Bank to draw up a code of practice that can be used against insurance companies by the Financial Services and Pensions Ombudsman in the courts; and allow the Central Bank to sanction insurance companies that continue to use dual pricing.
Everyone who has spoken today has outlined the experience of somebody in their constituency. I wish to draw attention to two examples. A young man who looked for insurance was first quoted €1,900. When he informed the company that he had Deputy Doherty on the case, it came back to him on the same day and quoted him €1,290 for his insurance. Another man who was with the same insurance company for seven years was quoted €935. When he demanded why it had gone up to such an extent, it was reduced to €640. That is not just two people's experiences; that is all our experiences. When people get an insurance quote, the first thing they do is ring that insurance company to ask why it has increased to such an extent. They demand a reduction in insurance premium because it is increased for no good reason whatsoever. The reason is price gouging.
It is important for the Government to defend the people and not the insurance companies. I call on the Government to withdraw its amendment and to support the Bill.
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.
I welcome this Bill. The Social Democrats are happy to support it. It is timely that it has come before us. I commend Deputy Pearse Doherty on producing the Bill, which deals with one of the very important aspects of the scandal that is our insurance industry. While it is just one aspect, it is a very important one. It underlines that there has been a huge amount of foot-dragging in regard to the glaring need for reform in the insurance industry, one that has been long-identified, with many promises made to do something about it. A Minister of State was appointed supposedly to deal with this issue but little or no progress was made in that regard. I welcome this Bill as this is an important aspect that needs to be dealt with. I hope the Government will not oppose it, but will actively support and facilitate its early passage.
The legislation being debated today is a no-brainer. The issue of dual pricing is well known and widespread. The Central Bank report published at the end of last year served to confirm what we all already knew, namely, that new customers are incentivised to switch providers with attractive entry deals while loyal customers are served price hikes each year.
Dual pricing amounts to discrimination, particularly against older people and more vulnerable people, who are less likely to shop around and switch providers. The so-called loyalty premium is, on average, costing customers who stay with their insurance providers approximately €160 per year. That is a significant amount of money in anybody's book. The UK has already moved to introduce an outright ban on this practice.
One has to wonder why the Government's insurance reform programme has been so slow and ineffective. Despite knowing that dual pricing is a major issue, and having a report now that confirms this, the Government has already said it will not tackle this issue until after the Central Bank issues a final report this coming September. One must ask why that is the case and what the justification is for such a delay. The legislation on dual pricing is before us and is ready for the Minister. I urge him strongly to take it on board and to deal, at least, with the particular aspect of very problematic industry behaviour that is provided for in the Bill.
We in the Social Democrats have been very vocal in calling for reform of the insurance sector. High insurance premiums add significantly to the cost base of our economy and that, in turn, makes affordable insurance fundamental to the long-term interests of the country. It is a huge issue for both consumers and business. The higher premiums go, the more they push up the cost of living. Let us not forget the detrimental impact that astronomically high insurance costs had on the childcare sector at the end of 2019, when many crèches were facing permanent closure because one of their insurers dropped out of the market.
The report upon which this Bill is based is part of a scope of work by the Central Bank to produce statistics and investigate the basis on which insurers have been increasing premiums. However, the Social Democrats are not satisfied that the Central Bank is sufficiently consumer focused in its approach. This is a problem that has been of concern for some time and it needs to be addressed. The bank does not collect enough basic data, particularly in regard to premiums, and it is not active enough on issues concerning vulnerable customers, market concentration and market volatility. We have been calling for some time for a new consumer affairs committee to be established, the sole focus of which would be outcomes for consumers. Regulators should expect to have to answer far more regularly for their actions or, indeed, in many cases, their inaction. Such a committee could play a valuable role in bringing about accountability as well as highlighting where there are gaps in legislation or deficiencies in powers that are available to regulators.
Today's Bill deals specifically with dual pricing in the motor and home insurance sectors. It is welcome in its own right. However, everybody in the House is well aware that our insurance sector needs a much deeper reform programme to address problems right across the board, including health insurance, childcare insurance, public liability insurance and added issues in home and motor insurance beyond dual pricing. I want to focus on health insurance in particular. Approximately 45% of Irish people have private health insurance. According to a consumer survey a few years ago by the Health Insurance Authority, 51% of customers pay more than €1,500 per year for their health insurance, 73% of them have never switched provider and two thirds of those who have switched have done so only once.
The Social Democrats are fully committed to the Sláintecare plan for our health service. We know, as everybody knows, that we are in desperate need of a universal single-tier healthcare system comparable to that of every other country in Europe.
That means ultimately eradicating the need that people feel currently to take out expensive private health insurance.
Every day that goes by with the Government continuing to drag its heels in implementing Sláintecare is another day with discrimination in our health service based on ability to pay. We must eliminate cost at the point of access if we are to address inequality in healthcare in this country. Everyone is signed up to that approach and what we need is action on that. In the meantime, though, there is need for reform in respect of dual pricing within the healthcare area.
I have mentioned the crisis that befell the childcare sector approximately one year ago. It is a perfect example of how high insurance premiums can drive up our cost of living and force businesses to close as well. Families with young children in this country face crippling fees for crèches and Montessori schools. This is due in large part to the cost of high premiums being passed on to them. The problem may have temporarily quietened down as a result of Covid-19 shutting down crèches for much of last year, but it has certainly not disappeared permanently. The Government needs to act to reduce the heavy burden of childcare costs on families. One way of doing that is to tackle the issue of the cost of insurance premiums, ensure they are reduced and that the resulting benefit is passed on.
We know that in the area of disability there is discrimination as well. There is an issue in respect of insurance. Another point I want to make pertains to discrimination, in effect, in the insurance sector. Under the Equal Status Act insurance companies have an exemption whereby they can charge higher fees in respect of people with disabilities. The Disability Federation of Ireland has flagged this as particularly concerning when it comes to employment. The federation has seen several cases where people with disabilities had job offers rescinded when employers found out that hiring them would lead to an increased insurance premium. This area needs to be addressed.
Fundamentally, I warmly welcome this legislation. It is an important part of the insurance scandal that has to be addressed and the Social Democrats wholeheartedly support it.
In my remaining time I wish to make a comment on other aspects of insurance that are being addressed at the moment, including awards made and the book of quantum. What is envisaged at the moment and what is being proposed by the Judiciary are wholly inadequate and will not address the fundamental issues relating to the level of awards that have been granted and the resulting impact on astronomically high insurance premiums for businesses and the public generally. That is probably the most glaring aspect of insurance that needs addressing.
Deputy Paul Murphy and I are sharing time.
I thank Deputy Doherty for this Bill and for continuing to bang the drum on trying to end the insurance rip-off. This Bill addresses one of the more obnoxious practices of the insurance industry, that of essentially punishing its most loyal customers for being loyal. It is an outrageous policy and of course it hits at the loyal customer. It also hits at the vulnerable customer who does not know how or feel confident to challenge an insurance company over increased insurance premiums. It is a rotten practice and it should be banned. That has happened in other countries but, of course, despite all the hand-wringing by those in Fianna Fáil and Fine Gael on this issue, they do not actually want it and they want to delay. There will be reviews. They need to wait for this, that or the other. I am so bored with that story from the Government because it is a story we have heard for years.
I remember I organised a meeting at the Red Cow Moran Hotel in 2017, when there was a particularly bad spike in motor insurance that threatened to run half the taxi drivers in the country off the road as well as hitting young drivers, punishing young drivers and so on.
Then finance committees were looking into it, reports were done and there were lists of recommendations as long as one's arm. What happened? Nothing really happened and the insurance rip-off continues. The Government does not want to do anything about it. We heard from some of its spokespeople that the reason it is unwilling to do so is its unwillingness to challenge the market. The spokespeople talked also of how it might upset competition. That is the essence of it. We must not upset competition, in other words, the private market. We cannot do it because we might deter these vampire insurance companies, for that is indeed what they are.
The insurance companies also lie straight out about the reasons for high insurance premiums. We had all the nonsense about how it was all due to fraud and that the fraudulent public were ripping us all off. Looking at the facts it can be seen that is not the case at all. Since 2009 premiums are up 42% while the number of claims is down 42%. Injury claims are down 20%. The frequency of claims is down 40%. The cost of claims per policy is down 3% but the profits of the insurance industry are running at about 9%, nearly double those made by the very profitable insurance industry in the UK. The insurance companies have used nonsense and lies to justify price gouging and rip-offs.
This has been serious not just for the young motorist and the loyal customer but it also has much deeper consequences because insurance covers so many other things. Taking the example of childcare, half of childcare operators in this country nearly shut down at the end of 2019 because one of the two providers of insurance to the sector decided to pull out and the remaining one took the opportunity to jack up average insurance premiums from €3,000 a year to €9,000 because it had a monopoly. As it happened, there was intervention, there were marches and so on and something was done about that but that is the way the insurance companies operate. They have us over a barrel. In spring of 2020 we had similar issues where they tried to take advantage of Covid and said they would not insure people in the context of Covid-19. There was intervention but the fact is that this is where these insurance companies have us. This extends to other areas of insurance such as home insurance. I will not go into health insurance except to state that there should not be private health insurance. There should not be profiteering from health. The only reason we have it is that there is a two-tier system. The public system is run down to bits and, out of fear, people are forced to pay extortionate amounts to private health insurance companies. That is money being leached away from the investment in the public health system which we need.
People Before Profit absolutely supports Deputy Doherty's Bill, but we must go further. Insurance is too much of a rip-off, they have us too much over a barrel. We need a not-for-profit State insurance company. This has been done in places like Canada and elsewhere where insurance is not a rip-off and is done on a not-for-profit basis because it is too important to many sectors of our society.
Listening to the Minister of State, Deputy Fleming, earlier I was struck by his focus not on the rip-off of ordinary people by the insurance companies, which is going on, but on the words "dual pricing". He seemed to be very offended by the words and insisted we must call it differential pricing instead. One may call it what one likes: differential pricing, flexible pricing, multiple pricing, variable pricing or indeed dual pricing, which is in fact what the Central Bank calls it. The Central Bank uses the term interchangeably with differential pricing. In a press statement on 14 December last year it said, "Dual pricing is evident across the private car and home insurance markets, where new and renewing customers are charged different premiums for reasons other than risk and cost of service."
However, in plain terms, no matter what one calls it, it is a rip-off perpetuated by the insurance companies. It is about insurance companies targeting those customers who they think are less likely to be able to shop around and hitting them with higher premiums. Older people and more vulnerable customers are the most common victims. The insurance companies do this using big data and obscure pricing models to make it so that victims do not even know.
The Central Bank estimated that seven in every ten insurance customers are being charged more than the actual cost of their insurance as a result of this practice, thus netting the insurance companies more than €180 million extra.
Instead of a Government which covers up the practices of insurance companies and distracts from them, we need a left Government which stands up to the big insurance companies and bans dual pricing. The simple truth is that the major insurance companies are ripping people off and the Government is letting them get away with it. More than a year ago, the Central Bank highlighted that the average cost of motor insurance had risen by 42% despite a 40% drop in the number of claims. What we have seen is a massive rise in profits of insurance companies. Those same big insurance companies have caused crises in community centres and crèches by denying them cover. In the case of small businesses hit by the pandemic, the insurance companies have dragged their heels and tried to avoid paying out.
We cannot leave the insurance industry to those vultures. It should be run as a public utility in public ownership and as a service for people, not an extortion racket for the insurance companies' investors. This whole issue highlights the lie that the model of free market capitalism is somehow efficient. For whom exactly is it meant to be efficient? It is not efficient for the worker who may have to spend a working day each year shopping around, looking for different insurance products and trying to find the best possible price. It is not efficient for older persons who may not use the Internet and are, therefore, left absolutely vulnerable to this complete rip-off without having any knowledge that it was perpetrated on them. It is efficient only for the insurance companies which utilise the mass of information that should be at our disposal as a society and could be used to benefit ordinary people but, instead, is only used to rip people off.
I refer to the increase in profits in the insurance industry. Data compiled by the Central Bank show that Irish insurance companies made profits of almost €3 billion between 2002 and 2016. Profiteering is at the root of the massive jump in insurance premiums in recent years rather than the increase being down to the magician's trick the insurance companies try to pull of pointing towards fraudulent claims.
I remember an interesting meeting of the finance committee at which the deputy governor of the Central Bank acknowledged that the presumption that encouraging more competition will automatically lower costs is an act of faith. It is simply an act of faith that has no basis in fact or the evidence we have before us. Instead of endlessly waiting for the invisible hand of the market to work its magic, the solution is for the State to nationalise the insurance industry and bring it into democratic public ownership to provide motor and home insurance as an essential public utility. The State should assume the responsibility to provide insurance as an essential public utility on a progressive and non-profit basis that takes account of people's ability to pay and ends the systematic discrimination against many groups of people, including young people, older people and those on low incomes.
I welcome the opportunity to speak on this very important issue. The cost of insurance is always on people's minds, whether it be car insurance, home insurance or business insurance. People do not know from year to year what their premium will be. They have no stability in terms of the cost of insurance, whether it is home insurance or other insurance. The idea that a person can go online to get a better deal when he or she gets his or her motor insurance renewal is fine, but those who do not have that access yet, such as some older people or those who do not have the right equipment to get online, accept the premium they get. However, this issue of dual pricing and loyal customers paying over the odds for remaining with their insurer flies in the face of fair competition. It needs to be examined.
I know of community services and community groups that are trying to keep their insurance in place to protect themselves as community voluntary groups. They are finding it more difficult year on year to insure the properties they hold on behalf of communities. The pricing seems to be erratic; there is no sense in it. The policies are complicated by the fact that different insurers offer different terms and conditions, so a customer needs to be an expert in insurance to differentiate what he or she is getting and to identify the best offer.
I have received many phone calls about professional indemnity insurance. It is very much needed by every business person, whether they be a sole trader or a big business conglomerate. The cost of professional indemnity insurance is rising substantially. From the point of view of the Minister of State, Deputy Fleming, who is present, he will see, and is seeing, increases in the cost of providing projects because of the increasing cost of professional liability insurance in the context of public sector contracts and similar situations where such insurance is required. That must be borne in mind.
I refer to public liability insurance and employer liability insurance, the cost of which is going erratically out of control. There have been increases that do not match claims records or whatever. Basically, every year, business people are holding their breath until they see what premium comes in on their insurance. They get different premiums based on the risk they take on themselves. Some of those risks are unacceptable and are putting businesses in jeopardy due to a lack of proper wholesome insurance.
I refer to the issue of flood risk insurance. I know of insurance companies that are refusing to offer flood risk insurance because there is some issue relating to flooding in a particular area even though the property in question may not have flooded in 50, 60, 70 or 150 years. If a map now shows there is a flood risk in the area, the insurance companies will refuse to offer flood risk insurance. This is causing problems for people who are trying to sell their properties to upgrade their homes and to have insurance as a safeguard for the future.
It is important that we look at this issue and consider how can we best address it. To be honest, deferring tackling this problem for six months or nine months is not the answer. We need to tackle it head on. The Government has been tipping around the edges of it. Some Deputies may say that we need to have competition and make the market attractive for insurance companies to come in and trade here. That is all very fine, but I believe that the Government and Members, as legislators, need to make sure that the cost of insurance is fair for the people who are paying for it. Insurance customers need to know what they are getting and get it at a fair price in terms of money and risk. This is something at which this House needs to look very seriously straight away.
Consideration should also be given to the other element of the issue, that is, the claims scenario. I compliment Peter Boland and the Alliance for Insurance Reform on their efforts to highlight all that is wrong in that particular area in terms of claims being paid out.
Now is the time to open this issue up and have a serious debate about it. We should ensure that the measures that are put in place are sustainable and do not have a negative impact on people.
For how long have we been talking about insurance in Leinster House and the Dáil? How many years have passed in which Private Members' Bills, motions, discussions, questions and hot air have been produced en masseon the issue of insurance in Ireland? What level of actual reform has happened in the intervening time? One of the most frustrating things about being an elected representative in the Dáil in the past ten years is comparing the level of conversation about the issue of insurance with the actual reform that has happened. Any insurance reform in recent years that has come from Fianna Fáíl or Fine Gael has been absolutely minimal. There is a reluctance and a resistance within those two parties in terms of tackling this particular sector.
I laugh when I hear people talk about Fine Gael being the party of the free market. The fact of the matter is that Fine Gael is the party of the dysfunctional market throughout Irish society, in market after market.
I could mention the beef, housing or insurance industries. Those industries are absolutely dysfunctional and there is nothing free about how they function whatsoever. Fine Gael has stood over the dysfunction in the insurance industry for years, at a massive cost. The instinct among Fine Gael representatives at the moment, especially around insurance and those other sectors I mentioned, is a laissez-faireattitude. There is an instinct in those political parties to sit on their hands and not interfere with those sectors, even if it is to reform them so they operate properly. As a result, we had a situation whereby hundreds and thousands of businesses were on the edge of existence before the pandemic hit as a result of price gouging by insurance companies. Businesses were unable to function. Everything else in those businesses was working okay. They had good customer relationships, products, marketing and communications and they were turning decent turnovers. The price hikes that happened within the insurance industry were eye-watering. I know of businesses in my own constituency whose insurance one year cost €2,000 and was then hiked up to €15,000. Other businesses saw premiums that cost €30,000 hiked up to €150,000. At the same time, the Government stood idly by and would not interrupt that behaviour.
The subject of today's Bill is to address an idea that turns business loyalty on its head. The current regime says that the more loyal a customer is to an insurance company, the more that company will profiteer from the customer and the more the company will gouge from the customer. Insurance companies take advantage of older people and make sure they take more money out of the pockets of those people. As a result of that, we have seen insurance companies make enormous profits over the past number of years.
I pay tribute to Mr. Peter Boland and the Alliance for Insurance Reform. Sometimes success has many fathers and many people have claimed ownership of reform in insurance here today. The truth of the matter is that people such as Peter Boland have done considerable work around the country to try to bring this issue to the centre of the political debate and make sure that it is heard. I pay tribute to people such as Peter Boland.
Aontú has been holding public meetings around the country and raising this issue, year after year. Along with our colleagues in the Regional Group, we brought about the Private Members' Perjury and Related Offences Bill, premised on the idea that perjury should be illegal in courts. That is something that the Government would not tackle at the time.
There was, thankfully, a recent High Court win for businesses, especially pubs, relating to business interruption insurance. I invite Deputies to think about that as an example. An insurance company took money from pubs and was not willing to pay them when the issue of business interruption arose. It is incredible that FBD Insurance is today looking to shut down the Financial Services and Pensions Ombudsman from investigating cases that have been brought to that office. A consumer protection body looking to be shut down by a private insurance company is absolutely scandalous.
On 20 February, a decision will be made regarding guidelines for payouts in the future. I hear that the judges are mobilising against it and I caution the Government not to go down that route. Irish payouts are already out of sync with international payouts in a range of areas and there need to be guidelines.
I compliment Deputy Doherty for his gallant and heroic efforts to deal with the insurance companies. It is an immoral and indecent racket that is not justified in any way, shape or form. I have been in business for 39 years; 40 years next year. I am talking about myself but the same issues apply to all others, whether small business people, clubs in communities, hillwalking clubs or whatever they are. We are all trying to do our best for the country but insurance companies keep ripping us off. Why would they not when Fine Gael and Fianna Fáil, Tweedledum and Tweedledee, have allowed them to do what they like? Of course, those insurance companies get big financial support and it is all very cosy. What is going on is a scandal.
Young people are trying to get insurance and when they read the fine print in the contract, they have none. During the pandemic, how many people had business interruption insurance? There were many; nearly everybody had it. I salute the four brave publicans who took a case to the High Court. The Central Bank, of course, should have taken the case, like the public agencies did in England, and forced FBD Insurance, the company in that particular case, and all other insurance companies to honour the commitments for which their customers have paid.
I remind every customer who has a policy that many of them have changed. The wording of their cover changes when policies are renewed at different times during the year, for example, in August and September. I urge customers to check it out. The cover will have changed from what they had and they will find that the small print has changed. Insurance companies are in the business of ripping people off, getting their money and paying out little. Every business has to make a profit but the insurance companies are blackmailing, blackguarding, gouging and betraying people, especially the elderly who have shown loyalty. I listened to Fran Curry's programme on Tipp FM this morning and some older people were talking about how their insurance premiums increased by a whopping 40% this year. Those people do not have the ability to shop around because they do not have the IT skills and everything else. Those people are being blackguarded. There is no loyalty. Insurance companies have deep pockets and have been aided and abetted by willing successive Governments for decades.
I have paperwork in front of me here but I do not need to use it because I know what I am talking about. I thank Deputy Doherty. I have been listening to what he has been saying for the past number of years and it is 100% true. The Government has failed to tackle this issue and that can be explained by a look at the Cabinet. How many of them are self-employed? I am self-employed and have vehicles parked at home which I am being charged full price to insure, as is the case for every self-employed person at the moment. They are being charged full premiums. Why has the Government not acted on this? Fine Gael has been in government for nine years and it has failed. The Cabinet does not have any self-employed people and does not understand them. It does not understand what it is like to wonder, week after week, if the cost of an insurance premium is going to rise.
I will tell the Minister of State how insurance companies work. For companies and small businesses, premiums rise and customers do not know what is going to happen from one end of the year to the next, even if they have no claims. I know a man who has been driving for the past ten years and whose insurance doubled when the premium for his car policy came out. He thought that could not be right and went back to the insurance company, explained that he has never had an accident, penalty points or anything, and asked why his insurance premium had increased by 80%. The insurance company told him that the statistics showed that he was due a claim. The statistics showed that. Four years on, he still has not had an accident or got penalty points but the statistics showed that he was due an accident and that is why the cost of his premium increased. That is wrong.
The Government needs to stand up and look after the people. Nobody in the Cabinet understands insurance.
I will start by thanking and complimenting Sinn Féin and Deputy Doherty for the sterling work he has put into this whole subject, not only in the preparation of this legislation, but in his work on the whole matter of insurance. I appreciate very much the fact that he went on our own radio station, Radio Kerry, last week and gave a comprehensive and proper report on exactly what he is doing here today. I am glad to support the Bill.
This is a most important issue. I see the number of people who are struggling. People have to pay their insurance, whether on their vehicles, properties or businesses. I have been paying public liability insurance for 35 years. Some years it is easy, but more years it is tough to make up the money to pay the premium. One has to pay it to keep one's doors open, lights on and wheels rolling. One has to pay it.
I feel sorry for young people who are given such a hard time by insurance companies when they start driving. We have to get rid of the automatic assumption that because a person is young, be they a boy or a girl, and inexperienced when they start out, he or she will be a big insurance risk. That is not always the case. Young people can be excellent drivers. They can be very careful and studious on the roads, doing their best to avoid accidents, the same as every one of us. They are hit with thousands of euro of a cost. Their vehicles might be reasonable to purchase but they are then faced with the massive cost of insurance. We have to protect those people and work for them. Anybody not supporting Deputy Doherty today will have big questions to answer in their constituencies.
I will definitely be supporting this Bill today. I welcome any move to tackle the problem of some consumers being charged higher prices than others with a similar risk profile. This adversely impacts more vulnerable consumers and older people. All consumers deserve to be treated fairly when purchasing insurance. It is essential that consumers and businesses should be treated fairly, equally and in a transparent manner, and not be harmed as a result of pricing models adopted by insurers. Motor and home insurance are not luxury products. Let us look at the way publicans have been treated. They were shamefully dragged through the courts by insurance companies while they were on their knees and had paid insurance every year without fail. They were loyal insurance payers. While publicans were going bust, insurance companies were boasting about great profits, yet nothing was done by the Government.
Then we have the young people who live in rural Ireland where there is no public transport. They need to be able to drive to get to school, college and jobs. These young people are being fleeced by insurance companies and charged astronomical prices. The situation is compounded by the driver testing system, which is nothing short of a joke. We cannot get tests for young people who need to be able to drive. In the previous Government, Fine Gael and Fianna Fáil backed Shane Ross's Bill and young people are now stuck at home thanks to that blackguarding, which is all it is, of young people. It is time for the Government to stop backing insurance companies and to stop them robbing and denying young people a basic human right that we all had when we were young and able to drive a car. The Government can stop crying crocodile tears for young people.
In my remaining 20 seconds I wish to raise flood insurance in Skibbereen, Bantry, Roscarberry, Rathbarry and other such places that were flooded in August. Some who had no insurance did not get the compensation package and in other cases people who had insurance who were flooded previously did not get money. It is all a pure scam.
I too thank Deputy Doherty and Sinn Féin for giving us the opportunity to talk about this very important matter, as we did on several occasions in the previous Dáil, yet we are still where we are. A 70-year old woman received a quote for more than €800 when she went to renew her insurance last year. Her son rang the same company to see what was the matter. He was a big customer as he had a lot of vehicles. He was asked if she was actually his mother. They gave her the insurance for €370 after. Can one imagine that? It was almost €500 of a difference.
Young drivers are paralysed before they get on the road at all. What is happening is very wrong. They are being charged €3,000 to €5,000 for their first insurance after doing all their driving lessons. It is very clear what is happening to taxis, commercial drivers, passenger buses, hauliers, pubs, restaurants and hotels. There is not enough competition. Not since Seán Quinn are we getting a fair crack of the whip for insurance.
When it comes to the cost of claims, it has been said that the people of Ireland must have brass necks, but I say they have gold necks because a whiplash in Ireland costs approximately €70,000 while in the UK it is €7,000. What is the difference in the necks here and the necks there? The difference is that we are paying more for the insurance. We are paying through the neck for it. What is happening is very wrong. I appeal to the Minister, Deputy Donohoe, to do something. I have one worry about Deputy Doherty's Bill, which I will support. Will the insurance companies listen? Will they bring down the cost of insurance if we get rid of differential pricing or will they put it up? That is my worry.
I am grateful for the opportunity to contribute to the Second Stage debate on this important Bill which was introduced by Deputy Doherty. I thank him for bringing forward the Insurance (Restriction on Differential Pricing and Profiling) Bill 2021.
In May 2019 we saw the headlines: "European Commission to investigate whether Insurance Ireland is operating a cartel" in thejournal.ieand "Insurers face millions of euro in cartel probe fines" in the Irish Independent. In February 2021 we saw the headlines: "Court rules pubs entitled to insurance over Covid closures" on the RTÉ website and "Irish Pubs Entitled to Get Lockdown Insurance Payments from FBD: High Court Ruling" in insurancejournal.com. Just this week, insurancetimes.co.ukhad a piece entitled: "Irish policyholders aged over 70 experience 'inflated premiums' for motor insurance", which stated that there are "staggering price differentials" for drivers aged over 70 in Ireland. Other media outlets were also covering the story this week, following a report published byinsuremycars.ie. Celine Clarke, Age Action's head of advocacy and communications said that the organisation has "previously asked for actuarial data regarding the setting of insurance premiums for older drivers from Irish insurance companies," but it was told that the information was commercially sensitive.
In preparing for this speech, I was thinking about the origins of the insurance sector. In fact, it is as old as society in some form or other. Unsurprisingly, I came across the following sentences:
A number of insurance companies were started in England after 1711, during the so-called bubble era. Many of them were fraudulent, get-rich-quick schemes concerned mainly with selling their securities to the public.
Some things have not changed in a couple of hundred years. I guess that there is little or no public trust in this sector, and despite some action, this and previous Governments have been very lax in regulating and sanctioning the sector. Many of us know to shop around for insurance policies each time they are up for renewal. People advise each other to get a number of different quotes from various providers and not to accept the initial renewal prices. The differences are often stark. Hundreds of euro can be saved by shopping around, and this obviously does not only apply to the insurance industry. The original provider may then try to manipulate a customer into keeping his or her custom with it by throwing doubt over the extent of the coverage of cheaper options. Often, even just by saying that one is shopping around, one can be offered a discount on one's initial renewal quote. Shopping around is time-consuming and may be confusing. A person needs to have a certain level of literacy, understanding and assertiveness to advocate for him or herself with these sectors. That makes it all the more appalling that insurance companies are using profiling techniques in calculating their premiums, such as determining how likely a customer is to renew. This is punishing a customer who dares to think that customer loyalty might be rewarded or that the company has their best interests at heart. There are often discounts for shopping online or renewing online but what about the people who do not have that level of computer literacy or who perhaps do not even have access to the Internet at home? The latter point has been highlighted recently. Constituents in Donegal are especially impacted by differential pricing and profiling because we have one of the highest levels of forced car ownership across the country, according to the report, Identifying Hotspots of Transport Disadvantage and Car Dependency in Rural Ireland. One could ask what hope we have.
This is a short but technical and very important Bill. It will address some of the discriminatory practices of some insurance providers relating to pricing and profiling techniques. The Bill addresses these issues specifically in the home insurance and motor insurance markets. Section 5(2) provides for the Central Bank to issue a code of practice. I would have preferred to see the wording "shall issue" rather than "may issue", as we need to be as strict as possible in this area and also strict on the Central Bank. Section 6 provides for the annual reports by the Central Bank, which should set out recommendations to ensure compliance with the Bill. I welcome section 6(3) which states that the Minister shall lay a statement before the Dáil to outline the reasons it is not accepting the recommendations of the Central Bank, if he or she does not.
I am pleased that we are discussing this Bill today and I hope the Government will accept it. It is right to see the media coverage highlighting the many problems with the insurance sector, but there must be follow-up. The sector cannot be allowed to discriminate against people in this way. It is laughable to see Government messaging about certain issues that have already been highlighted by the Opposition. We have good ideas and it behoves the Minister to listen to us and accept our ideas. That way we would all be working for the betterment of the country. Instead, there is a Government narrative of anything they can do, we can do better, or copying homework but putting a fancy Fianna Fáil-Fine Gael-Green Party logo on the top of the page. The electorate sees through that and they see the spin and delay. I welcome this Bill and will be supporting it. I commend Deputy Doherty on his work on this matter.
I endorse what the previous speaker said and I thank Deputy Doherty for bringing forward this Bill. We have discussed the issue of dual pricing and how wrong it is quite a bit. Effectively, it punishes customers of insurance companies for their loyalty. It is also important to point out that, in effect, it preys on people's vulnerability. What frequently happens is that it affects people who have been with an insurance company for a very long time, who know that they must insure their car, home or whatever else, and they get a bill in the post.
The only way to challenge that is to ring around or to ring a specific insurance company. At any time, and particularly at this time, it can be hard to get to speak to anybody in these companies. One rings up and is faced with an option of dialling 1 for sales, 2 for claims and 3 for whatever else. A certain group in society find this difficult. My parents were among them although they are no longer around. There is a large cohort that finds this difficult. It goes beyond insurance companies. Right across services that are provided, people think that a customer service is providing a telephone line that people can sit at the end of, pressing a number for different options. That is difficult for elderly people and for vulnerable people to do without getting confused. That needs to be addressed. That inability to demand a fairer quote is something that insurance companies prey on. People give up. They say that they could not get through and that they have to continue to insure their car, house, farm or whatever. Multiple-peril insurance is another example. That needs to be addressed.
I listened with interest to the Minister of State, Deputy Fleming's, contribution where he said that the Government has concentrated on dual pricing and accepts that it is wrong but that differential pricing is not, and that that is a reason to oppose the Bill. If we all agree that dual pricing is wrong, why is nothing being done about it by the Government, the Central Bank or anybody else? There is consensus in the House that it is wrong for a variety of reasons but nothing is being done about it. If the problem is differential pricing and the Government thinks that differential pricing is acceptable or offers benefits, can the Bill not be allowed to progress? I appreciate that the Title of the Bill might cause a problem but can we not see dual pricing addressed? Do we have to throw the baby out with the bathwater, as the Government is proposing?
We are now rightly told that childcare is essential to society. It is indeed essential to the functioning of society, yet crèches which offer childcare find it increasingly difficult to get a range of quotes for occupier's liability insurance. I see the Minister is shaking his head but I know that in the previous Government, his colleague, Michael D'Arcy, dealt exclusively with this issue, though not with much success despite his best endeavours. He said that he went to various underwriters in the United Kingdom etc. and they were pulling out of the market because they were not interested in quoting for Ireland.
There was a time when Fine Gael governments were not necessarily afraid to intervene in the market. A Fine Gael Minister set up the predecessor of VHI because there was a need for a State company to offer health insurance. I heard Deputy Boyd Barrett say that there should not be voluntary health insurance. That is a slightly different ideological matter. We all agree that childcare and crèches are essential and that, by law, they have to be insured. Is it not time for the State to offer occupier's liability insurance by setting up a company to intervene in the market? If the market is as skewed as the then Minister of State, Michael D'Arcy, found that it was because of the unwillingness of various underwriters in the City of London to quote prices in Ireland then the State has to intervene and quote prices for occupier's liability in this sector and across other sectors. The hospitality sector is closed for the moment and will be for an indefinite period but it will come back at some point and will need occupier's liability insurance. The State needs to look at intervening in this.
I thank all Deputies for the contributions they have made. I support the Government amendment moved by the Minister of State, Deputy Fleming. I will address some claims made by Opposition Deputies. A claim has been made about action that has been taken elsewhere and action that has not been taken here in Ireland. Those two claims are central to many of the political arguments put forward today. I will conclude by addressing some points in Deputy Doherty's Bill.
I begin by addressing a point made about what has happened in the United Kingdom. It is a point that has been made by many of the Sinn Féin speakers who supported Deputy Doherty's opening statement. Let us be clear about what has happened in the UK. I will read from the Financial Conduct Authority website because this set of facts has been entirely absent in what has been put forward in claims about what the FCA has done in the UK. It is correct to say that the FCA has put forward proposals to deal with this issue and it referred to figures that were accurately quoted by Deputy Doherty in his opening contribution. Let us look at what it will then go on to do, which its website states is as follows:
The FCA is seeking views on its proposals by 25 January 2021. It will consider all the feedback and intends to publish a Policy Statement and new rules next year along with its response to the consultation feedback.
When we are focusing on what is happening in the UK and claims of action being implemented in the UK, let us look at the reality of what is happening, which is that it has published proposals as outlined by Deputy Doherty, but these proposals are subject to public consultation and further feedback and will then lead to a policy statement with implementation of action next year. That is not what we have heard from some Opposition speakers here today.
Another claim made by many Deputies is that other countries have acted. Name the other countries that have acted. Name the countries in the European Union that have implemented the Bill that many Opposition Deputies are supporting. If a claim is being made regarding the need of the Government to act, on the basis of actions taken elsewhere, I ask those who are supporting this Bill to acknowledge the reality of what is happening in the UK and to explain how this legislation has been implemented elsewhere. If it has been, what are the effects of it? I make these points because this is an issue that the Government and Central Bank are taking seriously, which is why we are not tabling an amendment to oppose Deputy Doherty's Bill. We need to continue to engage on this critical matter. Claims that are being made about the need for us to act on the basis of action that has happened elsewhere need to stand up to scrutiny and to be debated in the House.
We then move on to what we are doing in Ireland, action that has already been taken and actions that are yet to be taken. Claims were made by many Opposition Deputies that nothing is happening. It is worth acknowledging and making the case for what has actually happened. Of the Government's interventions, a brief list would include the Central Bank national claims information database from 2018, the Insurance (Amendment) Act 2018, the Judicial Council Act 2019, Personal Injuries Assessment Board (Amendment) Act 2019, and, working with Deputy Doherty, the Consumer Insurance Contracts Act 2019. Action has been taken and action is to come. All of this is included in steps that have been outlined by the Tánaiste in a ministerial group that he is leading in the Government's action plan on insurance reform. It includes itemised actions that will be taken to deal with the rising premiums and the high premiums that many face, especially small and medium-sized business owners and what it means for their viability and ability to keep their companies going and employ people, which we know about and we acknowledge progress needs to be made on.
That is the reason these actions have been taken and the reason for the Government's action plan for the further steps we are going to take. With regard to the legislation proposed by Deputy Doherty, I also acknowledge the focus he has brought to this issue. I acknowledge the scrutiny he has brought in his analysis of what is, as I have said, a critical issue for many employers. However, we have concerns about this Bill. An acknowledgement of the Deputy's intent and of our commitment to act further does not prevent the Government from expressing concerns about aspects of this Bill and about what it could mean for those who will, in the future, need insurance policies that are more affordable than those now available. We have three concerns. The first is what this Bill would mean for the insurance companies operating in Ireland that offer discounts. That is a serious concern of the Government which needs to be reconciled with the intent behind this Bill, if possible.
Our second concern is what the Bill could mean for new insurance providers and suppliers entering the market or for existing insurance providers when providing new services in sectors of our economy in which they do not currently provide services. This is a legitimate and real concern. I heard Deputy McNamara correctly make the point that there were only two insurance providers for the childcare sector at a particular point. We saw the great difficulties this caused. If we want more suppliers of insurance services in more parts of our economy, it is surely legitimate to make the point that we are concerned that this Bill could affect, or even prevent, that. That is something the Government does not want to see happen.
The final point relates to why we are not opposing the Bill but merely putting forward a timed amendment. This is in acknowledgement of the work the Central Bank is doing and of the value of that work. From a process point of view, this work bears more than some similarity to the kind of work happening elsewhere which has been praised by Opposition Deputies. We believe it is appropriate that this work is concluded. When we have an independent regulator overseeing the sector, a regulator that has produced a report which has been commended by the Opposition, it is appropriate that we allow its process to conclude before the Government takes further action. Many Opposition Members will always create a narrative that the Government, the Minister of State, Deputy Fleming, or I am standing by an elite and by those who, it is claimed, seek to take advantage of those who need insurance. It is not a case of the Government standing with vested interests but a case of the Government recognising that work has already been carried out in respect of dealing with this issue. This work is led by our Central Bank. We should, and will, return to this issue when the Central Bank has concluded the process which it has itself initiated. It is for that reason that, in conjunction with all of the action steps we have taken and all of the policies in place, the effects of some of which were debated today, the Government is committed to making progress on this issue, among many others.
One fact, on which I will conclude and which was not acknowledged in today's debate, is that since the second quarter of 2018, insurance premiums in the motor sector have fallen in every quarter. This shows the difference that competition and the right policies can make in this area. It also reminds me of the need to allow our Central Bank to conclude the work it is doing. It is equally important that we accurately acknowledge what has and has not happened in other jurisdictions.
I commend my colleague, an Teachta Doherty, not only for this Bill but for the tireless work he has put in on this issue over recent years. I note that, in the Minister's contribution, he said that he has some concerns. It is very regrettable that the concerns he outlined were only for insurance companies and providers. Anyone watching this debate would prefer it if he had expressed even a small concern for customers. That is what the Opposition has been speaking about today - the customers of insurance companies who are effectively being gouged. They are not lazy; they have constraints on their time. They may lack the capacity to do the shopping around the Minister says is so important. They may not have access to the Internet. They might find it very frustrating to spend an hour or more on the phone or they may simply believe that the insurance companies should be regulated to the point that the practice of dual pricing would simply not be allowed. When the Minister came in, his concern was unfortunately only for the insurance companies. They actually seem to be doing quite well. It is the consumers at the business end of this issue who are being effectively ripped off. We need to end the insurance rip-off.
As I have said, in my own constituency in the north of County Dublin there are many areas that are not well served by public transport. Young people and people with young families have no choice but to have a car if they are to get around. The infrastructure to live their daily lives is simply lacking. They are extremely busy. They are not lazy or stupid; they just do not have the time to compare prices, shop around and so on. They need this regulation so that they will not be at the mercy of the insurance companies about which the Minister is so very concerned. They want fairness. They want to know that when they take out an insurance policy, it will be fair and they will get a good price without having to spend hours and hours trying to outwit the algorithms used by the insurance companies. They want to know that they will get a fair price. That is what an Teachta Doherty has sought to do here today and that is what everyone has spoken about - fairness for consumers. It is very regrettable that, when the Minister spoke, he spoke only about fairness for big multinationals and big insurance companies.
The good news is that this Bill to ban dual pricing by insurance companies will be passed. The bad news is that, rather than allowing the Bill to proceed to the next stage quickly, the Government has instead delayed its passage by nine months. The fact that the Government did not oppose this legislation outright is testament to those who have highlighted the insurance rip-off in this country. I commend all of those motorists, homeowners, businesspeople, childcare managers, community groups and others who have publicly told their stories of despicable practices and unjustified premium hikes by the insurance industry. I thank all of those people who contacted their Government Deputies asking them to support this week's Bill to ban dual pricing. I am firmly of the view that, without their efforts, the Government would undoubtedly have voted against this Bill entirely. Anyone listening to the Minister will have heard somebody who is wedded to the status quo, who is happy to allow insurance companies to continue fleecing their customers, and who had to be taken kicking and screaming to the point we have reached today. Above all, I commend Deputy Doherty, who has done more than any other single person to expose the price gouging and uncompetitive and downright reprehensible activities of the insurance industry. He has also highlighted the inactivity, verging on outright complicity, of successive Fianna Fáil and Fine Gael governments. Without Deputy Doherty's efforts, we would not have had the spotlight shone on these practices which have been such a burden on ordinary workers, families and businesses. Without his tenacity, we would not have known of the lengths to which insurance companies will go to squeeze every last cent from their customers and, therefore, the Government would not have tackled these issues. It is fair to say that without Deputy Doherty, many people would not even know what dual pricing is, let alone be part of this campaign to outlaw it.
Let us remind ourselves that dual pricing is the mechanism that insurance companies use to fleece their most loyal customers, who are often their most vulnerable ones. This practice will be banned because of the efforts of Deputy Doherty and of all those people who got behind this campaign. The Government may be able to delay progress but it will not stop it. I commend this Bill to the House.
I thank all of the 26 speakers who have spoken on this legislation so far, those who offered their support - outside of the Government speakers who are attempting to delay this legislation - and those who mentioned me, in particular.
This legislation is about fairness. I will deal with some of the issues put forward by Government spokespersons in their rebuttal. To the Minister, Deputy Donohoe, I say that he is a year behind the time and needs to catch up. The UK's Financial Conduct Authority, FCA, is not completing its consultation next year; it completed it on 25 January this year and is going to announce its final price remedy in the second quarter of this year, not next year. This will come into effect four months from the date of the announcement, that is at the latest in October, and not next year. This will be the third round of consultation. The first report that it carried out did not seek to ban the practice. After consultation with the industry, the second report found that the industry would not go far enough and the authority says now that there is nothing to do but to ban it. It is now looking at the tweaks as to the implementation of the ban and not at the ban itself. It will be banned in Newry, Strabane and Belfast later this year but here in this State, our Parliament or at least our Government are happy to allow insurance companies to facilitate this price gouging.
On the Minister’s second issue as to discounts, this legislation does allow for discounts. The Minister of State, Deputy Fleming, made the same claim. It is deeply regrettable that the Government does not understand the issue in terms of the legislation. Section 3 of the Bill, for example, provides that rating “factors [cannot be used] unrelated to risk other than for the addition of business expenses”. What are business expenses? These are defined in section 4 of the Bill and the definition is actually lifted from the Central Bank (National Claims Information Database) Act 2018 which says that these business expenses provide for commissions and acquisition costs in acquiring new policies, which can include discounts. Dual policies, whether it is home or motor insurance, can also continue to exist where there are discounts there, as long as they are also provided to renewing customers and not just to new customers. The Minister’s arguments are falling flat.
They talk about the issue in respect of new providers. I put the evidence before the Ministers again from the Financial Conduct Authority. Why is this important if it is coming from a different jurisdiction and is it relevant to here? Of course it is relevant because the Central Bank and the FCA came to the same conclusion on the overcharging of motorists and homeowners with this practice because most of the companies operate in both markets. The FCA found when it looked at 17 million different parts of policies, across 6 million unique policy documents, that this is actually going to increase competition.
How does that work? It works because insurance companies like Allianz, Aviva and Liberty have a huge amount of data on individuals. Their pricing models are based on how likely it is that customer “A” and “B” will stay with a company or shop around. If these customers are likely to stay, with all of the information that the companies have gathered and can purchase on the individual over the years, they can then push up the premium to exorbitant levels. A new entrant cannot compete with that. That is why there is a European investigation being carried out on data-sharing by the industry here in Ireland. There have been dawn raids on the industry because they are operating like and have been called a cartel. By levelling the playing field one is actually increasing competition, but the Government does not need to take my word for it, it can take that of the FCA which has looked at this issue right across the same insurance companies that are operating here.
The Minister also said that this Bill would impact on childcare settings and providers that are not being covered any more. The legislation does not deal with that but deals with motor insurance and home insurance. I ask the Minister to read and understand the legislation, please.
The Minister of State, Deputy Fleming, claimed that every speaker spoke of dual pricing and omitted to talk about differential pricing. He went on to say that this is not what the legislation is about. I drafted the legislation. The Central Bank report which we are waiting for was commissioned at my request. The Minister of State, Deputy Fleming, did not raise this issue and neither did the senior Minister for years, despite the positions that they have held.
The reality is - this is where the Minister of State, Deputy Fleming, should stick to his script because these were unscripted comments of his - that dual pricing is a form of differential pricing. My word does not need to be taken on this, one need only look at the Central Bank’s report, and perhaps even read it. What we are doing is restricting differential pricing by banning dual pricing. For 77% of customers who are renewing home insurance and 67% of motor insurance customers, this will put money back into their pockets. The FCA has estimated that this will benefit between €4.5 billion and €12 billion over the course of a decade by putting money into people’s pockets, increasing competition and increasing transparency.
I have already introduced legislation and I have worked with Government on it, but the Government has delayed it for two years and is pulling the same stroke here by delaying this important legislation. I ask the Government to drop the delay and to allow us to proceed to Committee Stage with regard to some of the preparatory work that is needed. I appeal to any person who is watching this, that the Government may try to delay us but will not stop us. In the meantime, people should not accept their insurance renewal and should shop around because insurance companies are fleecing people. Until the time is reached when we get the better of the Government on this issue and these practices are banned, the public are vulnerable to these exploitative practices.