EIOPA seeks input on supervisory statement on differential pricing practices

The European Insurance and Occupational Pensions Authority (EIOPA) has launched a public consultation relating to a draft supervisory statement on differential pricing practices. Comments can be submitted until 7 October 2022.

For the purpose of the statement, EIOPA understands differential pricing practices as those pricing techniques in which consumers with similar risk and cost of service characteristics are charged different premiums for the same insurance products.

The statement reflects upon “price walking” in particular, which refers to the practice of increasing premiums at the renewal stage based on the analysis of characteristics specific to a particular consumer to predict behaviours not related to risk or cost of services, such as how much of a premium increase an individual consumer will tolerate before shopping for coverage with other product manufacturers. The increasing use of different types of behavioural data increases the risks that some of these datasets can be biased (i.e. correlated with protected characteristics) and therefore increases the risks of indirect discrimination. These risks are amplified when processed with complex AI systems, which can find non-linear combinations between the variables and therefore somehow reconstruct protected information.

EIOPA’s objective with the statement is to strengthen consumer protection by preventing the unfair treatment of consumers and to promote greater convergence in the supervision of differential pricing practices, to ensure that detriments to consumers are prevented via adequate product oversight and governance (POG) processes.