European regulators watch price-walking tactics in auto & household, suspect discrimination

European insurance regulators could be prompted to follow the lead of their UK peers in taking a closer look at cases of price optimization that penalize loyal customers, the European insurance regulatory office  EIOPA has suggested.

"While this trend is not yet widespread across Europe, more than 50% of NCAs observed that more and more insurance product manufacturers adjust premiums using a number of different techniques which are largely independent from the risk profile of the consumers," authors wrote in their 2021 Consumer Trends Report, released January 24.

Some 59% of EU national regulatory authorities see evidence of price optimisation in their motor insurance markets and 29% of see evidence in household insurance, an accompanying survey of national regulators by EIOPA showed.

"The major consequence stemming out of these practices is an increase in premiums for old/loyal consumers and vulnerable consumers," EIOPA authors wrote

"Instances of unlawful indirect discrimination have also been observed and this, in the longer term, could lead to an increase in financial exclusion."

Regulators blame the one-two punch of stiff price competition and "inert" customer behaviour on a market where new data and analysis techniques allow insurers to adjust premiums for behavioural factors lying well outside a client's risk profile.

Regulatory action to date has been minimal. Some 5% of national regulators claim to have completed their planned regulatory response, 4% say actions are ongoing, and 4% say they've already pout intended remedials into their action planning, but without steps taken to date.

The UK's FCA implemented fresh rules against so-called price-walking on older clients, effective at the beginning of 2022.

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