Date: 17th October 2022

Explanations A differential pricing mechanism in insurance contracts describes a practice by which an insurance company adapts the cost or price of the product/service on considerations other than the expected risk premia or estimated expenses.

Put simply, prices will reflect how proactive or passive a client is (shop around or not) rather than the risk related to the insured event.

Detrimental effects for consumers Differential pricing mechanisms can have detrimental effects for consumers, from mis-selling to losing trust and distorting competition on the market.
Use of big data and AI Differential pricing mechanisms are based on personal data processing – EIOPA should closely supervise the principles of purpose limitation, data minimisation, and legitimacy of processing of data in insurance companies.
Adequate product governance mechanisms All rules laid down in the IDD delegated regulation on product oversight and governance (Arts. 4-9) should be adequately observed by product manufacturers and distributors of insurance products.