The choice is out there

A new survey by the NCA proves what many consumers have long suspected – when it comes to insurance, shopping around saves money…


A new survey by the NCA proves what many consumers have long suspected – when it comes to insurance, shopping around saves money

GIVEN A CHOICE, would you prefer to blow a couple of hundred euro on a fancy meal in a nice restaurant or allow some faceless executive in an insurance company spend it on your behalf? Stupid question. Of course you’d prefer to keep your own money, but unless you are on the ball, you could be throwing away hundreds of euro needlessly each year.

A survey published last week by the National Consumer Agency (NCA) found that canny consumers could knock as much as €8,385 off the cost of dual-life term cover and up to €9,576 off their mortgage protection cover just by shopping around.

Savings of this magnitude are something Pricewatch has known about for some time, thanks to a colleague. She bought a house several years back and without thinking too much about it, took out a mortgage protection policy with the same bank that gave her the home loan.

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The policy, covering a €300,000 mortgage, was costing herself and her husband – both non-smokers in their early 30s – a fairly hefty €109 month. She paid up for the first two years but then, one afternoon and with time on her hands, decided to have a look around to see if she could get it cheaper elsewhere.

Minutes later, the website 123.ie quoted her €639 per annum – she was paying €1,308 – and also offered her a 50 per cent discount in year one. In the first year alone, she was able to knock €1,000 off the cost. Over the lifetime of her mortgage, the total savings will amount to €13,700. As both policies simply covered the mortgage on the house, they were identical.

That’s not bad for a single phone call but it is a call that too few people make.

Life assurance is bought as a long-term product and is unlike many other types of insurance which are renewed every year. As a result, people tend to buy it and forget about it.

The NCA study confirms that this anecdote is not a one-off. It selected a range of consumer profiles in order to establish the benefits of shopping around. It revealed that when it came to life assurance, savings of €8,385 could be found for dual-term life cover of €260,000 over 25 years for two smokers aged 35 – that’s €335 per year. For a non-smoking, 28-year-old couple, savings of €3,956 for dual-term life cover of €380,000 over 35 years could be made, which works out at €113 per year.

When it came to mortgage protection cover, the study found that savings of €9,576 could be made for joint mortgage protection cover of €380,000 for two smokers aged 28, over 35 years. That’s €274 per year and for non-smokers savings of €4,410 for cover of €380,000 were available.

“Based on the profiles used in our survey, considerable savings, running into hundreds of euro per year and thousands over the lifetime of policies, could be made simply on the basis of choosing the most competitive policy,” says the NCA’s research director, Maria Hurley.

“While every consumer is different, the message is clear from all of the examples in our survey – it can pay handsomely to shop around.” Hurley says it “is very important to put in the effort to shop around for the best premium up front, as the savings will accrue to you over the life of your policy. Bear in mind too, though, that your life cover needs may change as a result of important life events such as getting married or having a child, so you should review your insurance if your circumstances change.”

Ciaran Phelan, the chief executive of the Irish Brokers Association sings from the same hymn sheet. “Total insurance costs add up to one of the biggest expenditures of a family’s annual budget,” he says.

“Nearly half of Irish households phone a couple of insurance companies themselves every few years, identify the best deal at that time and just assume that the same provider will continue to offer the best price. That’s wrong. Prices change dramatically all the time, so it pays to let a broker shop the market and get the best cover at the most affordable price.” Given his role, he is hardly the most impartial of commentators but for many people, brokers make a great deal of sense.

Joe Charles of Caledonian Life says the NCA’s findings mirror the results of a study which the company conducted recently which examined the typical monthly life assurance costs at a range of common price points.

“Our study revealed a staggering price differential of up to €7,500 between the most expensive and the cheapest insurance products on the market,” he says. He says that mortgage protection cover for the same person with the same value on their mortgage varied by as much as €350 a year.

Apart from seeking a few competitive quotes and not taking the first policy offered, the NCA survey also identified another area where big savings can be made, although only if you’re one of the 30 per cent of Irish adults who smoke. By quitting, smokers can achieve thousands of euros in long-term savings. Ex-smokers should contact their insurance company if they have stayed off cigarettes for at least a year as they should be entitled to discounted premiums.

“Smoking continues to be a significant issue when it comes to the pricing of life and serious illness policies. Smokers now typically pay over twice as much as non-smokers for life cover and specified serious illness,” according to Keith Butler, actuary with Acorn Life.

While the NCA was focused on pointing people towards potential savings, others have been more concerned with the number of people who have no life assurance at all.

Irish Life issued a report last week which found that half a million parents with young children say they wouldn’t be able to cope financially if there was a death or serious illness in the family, yet almost half a million parents and 50 per cent of all adults have no life or protection cover of any kind outside of their basic mortgage protection cover.

“These figures are very worrying as they highlight the financial fault lines at the heart of Irish society,” says Gerry Hassett, chief executive of Irish Life.

In full hard-sell mode (with just a hint of a guilt trip, added to the mix) Hassett says life and protection insurance is much cheaper than people think and claims that “a typical parent” (whatever that means) of young children “would only pay around €15 a month for €100,000 worth of cover. He says it is “crucially important for people, especially with children, to have protection plans if they want to ensure their families are financially secure in the future”.

Irish Life also launched a television advertising campaign last week in which a dead father (well, he’s either dead or has faked his own death and run off to Central America) has written to his son who has now come of age. In the letter, the father highlights all the times he looked after his son – he put sun cream on him when he was five, made him wear a bicycle helmet at 10 and suggests condoms on the way to his debs.

The dad points out that while he may be gone now, he had the good sense to take out a policy with Irish Life which will see the son through college. We asked on Twitter what people thought of the advertisement and most respondents were unimpressed.

“Saw it last night after the funeral of a young family member . . . didn’t appreciate it,” said one reader. “I think it is awful, very grim, wouldn’t inspire me to buy life assurance at all,” said another. “As lame as a dog with three legs. And pretty morbid,” said a third. “Dead dad does good. What’s not to like?” suggested a possibly tongue-in-cheek response. A further respondent said it was “so heavy handed, and the dad-watching-out-from-beyond-the-grave has been done (to death)”.

One reader was in favour. “I think it’s fine. Gets the message across.” And certainly, buying life assurance is a message that does make sense and shopping around for the best value makes even more.