Premium price data needed ‘to keep insurers honest’

The Alliance for Insurance Reform says it is starting to see auto insurance premiums creeping up again, despite a large reduction in the costs involved in settling claims.

This follows Central Banks introducing a ban last year on what is known in the industry as price walking.

This means insurers cannot charge consumers who are on their second or subsequent renewal a higher premium than they would charge new equivalent customers.

The purpose of the ban is so that consumers who continue to use the same provider will no longer pay loyalty penalties.

Speaking on RTÉ’s This Week programme, Peter Boland of the Alliance for Insurance Reform said that judicial guidelines coming in 2021, which reduce damage rates for minor personal injuries, are “an issue on which insurance companies have hung over for years”.

“They say once it’s done, premiums will go down. What we know now is that in that year premiums fell 2%, which was marginal”.

Meanwhile, RTÉ News has learned that in measuring inflation in the motor vehicle insurance market, the Central Statistics Office (CSO) has no way of factoring in prices into its calculations.

When calculating vehicle insurance premiums, CSOs obtain online quotes for various driver profiles from a process called web-scraping, and collect hundreds of representative quotes from each insurance company using their online quote engine.

This is an efficient method and allows them to get a large number of offers across various driver profiles, however, it is limited, because every time a CSO gets an offer, it is for a new customer.

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The method cannot account for the practice of price walking, where renewing customers are charged a higher premium even if there is no change in their risk profile.

The Central Bank calls this the “loyalty penalty”, because consumers can in many cases get much cheaper premiums simply by switching to another provider.

Although CSO’s figures show a decline in motor vehicle insurance premiums last year, they do not take into account new customers who are charged higher premiums.

The Central Bank, which banned price walks last July, pointed out that insurance premiums could increase without price walks if, for example, there is a change in a customer’s risk profile, resulting from making a claim or a change in insurance rates for the same risk.

The regulator said it continues to engage with insurers to ensure oversight of pricing practices and monitor developments to ensure that companies deliver fair results.

NCIDs vs CSOs

In 2019 the Central Bank started compiling data on personal auto insurance for its National Claims Information Database.

NCID is almost the entire market and is based on earned and annualized premiums.

While CSO is a sample of quotations and is monthly in nature so there is a potential for discrepancies to occur.

However, since it looks at premiums paid and not quotes for new customers (as CSOs do), it can be considered to provide a more accurate measure of pricing.

For example, for the period between 2009 and 2021, CSO figures show a 9% increase in auto insurance premiums.

However, the NCID figures for the same period show a much more pronounced increase, at 23%.

Mr Boland said insurance companies “repeatedly told us they were not involved in double pricing or pricing, then the Central Bank went and did research, which showed pricing is commonplace in the private car and home insurance market.”

“For insurers to be honest, we need data. We cannot rely on CSO data specifically. We are waiting for Central Bank NCID data to give us an insight.

“Our big concern is that the informal research we did over the last three years reflects what the Central Bank says, but in recent months motorists have told us their premiums are creeping back up.

“If there is any suspicion that price walking is happening again… that is absurd”.

He said the Government needed to “apply intense pressure on insurance companies to lower premiums”.

Insurance Ireland, which represents providers, said that the Central Bank and CSOs were showing an “ongoing downward trajectory” in auto insurance costs.

The industry body also said official data showed insurers had kept their commitments to pass on savings arising from the new personal injury guidelines.

Regarding price walking, Insurance Ireland said insurance companies are required to follow the rules imposed by the Central Bank and they will continue to support the implementation of these rules.