Central Bank proposes to end the loyalty penalty for private car and home insurance customers
Executive Summary
The Central Bank of Ireland (CBI) proposes banning "price walking" in private car and home insurance to eliminate the loyalty penalty, where long-term customers pay significantly higher premiums (14% more for car, 32% more for home after 9 years) than new customers with similar risk profiles. This stems from a 2021 review finding differential pricing unfair to loyal or less mobile consumers, with regulations finalized and effective from 1 July 2022, confirmed effective in subsequent reviews. It matters as it enforces fair treatment under CBI's consumer protection mandate, requiring insurers to overhaul pricing models while preserving new customer discounts to maintain competition. #
What Changed
- - Ban on price walking: Insurers cannot charge second or subsequent renewal customers a higher premium than an equivalent year-one renewal customer with similar risk and service cost.
- Disclosure of new business discounts: Firms must clearly disclose to new customers that lower prices include a new business discount.
- Annual pricing policy reviews: Providers must review pricing policies yearly to ensure focus on customer impact, adherence to rules, and fair treatment.
- Automatic renewals requirements: Introduce consumer consent for automatic renewals and enhanced information/reminders to support informed decisions and switching. These were implemented via the Central Bank (Supervision and Enforcement) Act 2013 (Se
Suggested Considerations
- Pricing model adjustments: Revise systems to ensure renewal premiums ≤ year-one premiums for equivalent risks; test against historical data (e.g., 11 million policy records analyzed).
- Disclosure updates: Amend new customer communications to explicitly state "new business discount" inclusion.
- Governance and reviews: Implement annual pricing policy reviews with documented evidence of customer impact assessment and fair treatment compliance; integrate into board/CPC oversight.
- Renewal processes: Obtain explicit consumer consent for auto-renewals; provide reminders and clear switching info pre-renewal.
- Monitoring and reporting: Conduct internal audits; respond to CBI engagements; retain records for supervision.
- Training: Update staff on rules to avoid breaches, especially in quoting/renewal teams.
Key Dates
Compliance Impact
Urgency: low (as of 2026). Rules have been effective since July 2022, with CBI's 2023/2024 review confirming no loyalty penalties, no unintended consequences, and market stability—Ireland was first EU state with such a ban. Firms compliant since 2022 face ongoing low-risk monitoring; non-compliance risks enforcement under Section 48(1), but positive outcomes reduce immediate pressure. Matters for
Who is Affected
References
AI-generated analysis. May contain errors or omissions — verify with the original CBI source before acting. Full disclaimer.
Summary
Review finds that differential pricing practices can result in unfair outcomes for some consumers Proposal to ban the practice of ‘price walking’ to end the loyalty penalty for consumers who do not switch insurance provider regularly Proposals will ensure that new business discounts are still available to allow consumers to seek the best prices, while ensuring that those who remain with the same insurance provider are not penalized The Central Bank is proposing to ban the practice of price wa...