Irish consumers face expensive decisions on many types of insurances, writes Nick Charalambous.
Some of these insurances we have to buy, such as car insurance, mortgage protection, and house insurance. Others we choose to buy, including health, illness cover, and gadget insurance. Paying too much, or getting inadequate cover, can be very expensive.
Unfortunately, insurers are gaining a reputation for not putting consumers first. That many consumers do not fully understand insurance makes matters worse.
Mortgage-protection insurance is a legal requirement, but the problem is choosing which one from the huge number of policies available and doing so at a very stressful time.
From my experience of working in banks, consumers probably wouldn’t have, under other circumstances, bought the policy they did. And many types of insurance that cover mortgage payments are, in any case, only paid out in the event of an untimely death. The scandal in the UK — the government forced the banks and insurance companies to rebate consumers — is an example of what can go wrong with payment-protection insurance.
Another insurance we are obliged to purchase is car insurance. It’s more important than ever to review your policy. Since June, 2013, the average insurance cost has soared. Using brokers to shop around and or going online can help, but you need to know what to look for.
I had a client contact me last week, who had a very competitive quote from one of the online companies, but begged me to find an alternative provider, even though it could cost more, because the customer service was painful.
Despite having breakdown assistance, the client had been stranded on the side of the road, unable to get through to the insurance company.
Brokers can secure savings, for example, by adding a second driver to a policy, which is legal and can save a lot of money.
Insurances we choose to buy include cyber-insurance and gadget insurance. The Central Bank published a report last year into consumers’ experience purchasing gadget insurance and found the majority of consumers did not understand what the cover entailed. It also found many consumers hadn’t intended to buy the insurance, until it was sold to them as an add-on at the point of sale.
And then there is health insurance, which is a massive industry in Ireland, with over 2.1m people insured. But the market is complex to navigate. Despite a very good government price-comparison website from The Health Insurance Authority (www.hia.ie), there are over 400 plans and that makes it virtually impossible for consumers to buy with confidence.
Lifetime community rating, which was introduced three years ago, has, in my opinion, not had the desired effect. The levy, which effectively encourages younger people to take out health insurance, places an additional cost on people aged over 34.
As a 44-year-old, if I hadn’t health insurance and bought it for the first time, I would suffer additional costs over 10 years. The levy was supposed to control premium inflation. And many of the people who bought insurance purchased basic plans. They might cost around €500 a year for an adult, but they can offer poor cover.
Given the average cost of health insurance in Ireland is circa €2,500 for a family of four, it is really important to get independent advice, but it is very difficult to do so.
If you speak to one of the three health insurance companies, they will point you to their own plans and more than likely a more expensive option.
Nick Charalambous is managing director of Alpha Wealth and Alpha Health in Cork and Dublin