Irish Financial Review

Only way to keep insurance costs down in shop, shop, shop!

By Gary Sinclair

Across Ireland, families are experiencing car insurance premium increases that run way ahead of official inflation.

 

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Putting time aside to shop for the best insurance deals can pay dividends.

The annual cost of car insurance is extremely important; the more people that carry it protects the viability of the overall market.

But taking a look at the cost of my own car insurance from 2004, 2005, 2006, 2007, 2009 and 2010, I have actually seen very little difference in the overall cost of the annual premium. This is despite the fact I continue to drive the exact same car (same make and model) with the exact same engine size (1.4litre) which I usually trade in every 2 – 3 years.

What I am certain of is that without my annual ‘insurance outing’ where I really put insurers to the test and get the best price, I WOULD be paying a lot more!

For example, in 2012, when the cost of my car insurance shot up from €398 to €610, I could have chosen to accept the new premium. However, putting some time aside, I eventually got the premium down to a very reasonable €300. I did this by calling my insurer directly (they offered a reduction to €550), calling a broker (they got it down to €500), the competition (they quoted €450) and then, re-contacting my existing provider. When they were about to lose my business, they quoted €300. The only sting in the tail was that the broker charged non-refundable fee of €40 for comparing the market.

2017 has started off with some sticker shock; my existing provider quoted an annual premium of €590, up from €432, a rise of 37%!

So, it was back to my ‘insurance outing’. I beat the bushes for the best price. But this year, things do feel different. Insurers appear a lot less willing to negotiate; some quoted higher prices (€620) and were not willing to do a price match. But perseverance eventually paid off. I settled on one that quoted €480. I have used the company in the past and their excess and other ‘conditions’ were in line with my existing provider. Finally, I returned to my existing provider. Yes, they would reduce their price from €590 to about €560 but that was it. So, I bid farewell and moved on. Thank goodness for competition!

Rolling premium cost for over a decade

For me, my rolling annual car insurance premium for the last 13 years is €462 so 2017 represents a 4% increase on that. Not too shabby!

Combined value

On home insurance, the picture is a lot more positive.

During the great recession, I managed to track the replacement cost of the home and manage the insurance cost in the process. But in general, I have seen my home insurance costs decrease significantly. I still live in the same home and now pay 34% less than I did in 2007. In fact, when I look at the rolling average of my insurance for the last 12 years, I pay 33% less. In fact, the worst year for home insurance costs was 2010, where I paid €468 (my 2017 premium is €238), that is a 49% discount.

When I compare my rolling average cost of both car and home insurance for the last 12 years, I pay 5% less in 2017 than I have done on average for the last 12 years and this cost is still 16% less than the average combined premiums in 2009 – 2011.The combined cost in 2017 is also 16% lower than the combined cost in 2007.

Tackling claims

Hopefully, Government plans to challenge some claims culture issues will have a positive impact for policyholders everywhere, especially, when it comes to premium costs.  But there is no doubt that consumers still have a vital role to play in keeping insurers in check. Shopping around for the best deal does work, it forces insurers to sharpen their pencils and keep costs down.

Three steps to better prices

So, when it comes to home and car insurance, there are a few things I do every year that seem to have paid off:

  1. Start early – do not leave your insurance outing to the last minute. Start as soon as the renewal notice arrives.
  2. Compare like-for-like. I stick to my guns on this point. I write down the primary insurance needs (level of cover, type of cover, excess limits and so forth) on a sheet of paper and use this to get the best quotes. If I want to add on any extra insurance items later (such as various types of no-claims protection on car insurance or additional items to be covered on home contents), I can do this separately.
  3. Give a final call to your existing provider. Sometimes my existing provider has come back and matched or beaten a competitor’s price. For 2017, although my existing provider did offer a discount of 5%, it was not enough. The competition was almost 20% cheaper. Overall though, I am paying 11% more for car insurance in 2017 than a year ago.

I am not sure if happy shopping is the right phrase but shopping-‘till-you-drop can pay dividends and put money back in your pocket when it comes to getting the best car and home insurance deals.

Happy shopping!

5 handy websites to compare costs in 2017

According to a recent study published by Retail Ireland, Irish households were predicted to spend an average of about €2,600 during the recent Christmas period.

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And separately, according to the Irish League of Credit Unions, half of people borrow money, either by way of personal loans and credit cards to finance their Christmas spend.

With the arrival of 2017, now is a great time to take stock of some major annual expenses and look for ways to keep them under control.

To help you, we put together some useful comparison resources that should make comparing costs a little easier.

For this exercise, we have focused on essential costs, including:

  • Health insurance
  • Home energy costs
  • Home heating oil
  • Petrol & Diesel costs

So, let’s begin with a big-ticket expense that impacts the budgets of lots of families all over the country; Health Insurance.

Compare health insurance options at www.hia.ie. Every year, the cost of health insurance rises so it is really important the policy holders understand the exact level of cover they have currently as well as their needs. The Health Insurance Authority is a statutory regulator of the health insurance market. Their website compares  hundreds of different plans and allows users to compare an existing plan with comparable products in the market.

Home energy costs – a big expense for many families during the year is the cost of utilities, including gas and electricity. For this, you have a number of options, including www.bonkers.ie and www.switcher.ie. Both websites compare the most popular suppliers of both gas and electricity.

Home heating oil – A great website to compare the best prices on home heating oil is www.cheapestoil.ie. It supplies the best quoted prices from suppliers of home heating oil all over Ireland including a breakdown for 500litre and 1,000litre fills.

Petrol & Diesel – there is no escaping that car fuel costs can really add up during the year. In fact, by the cost difference between many of the lowest and highest prices at forecourts can vary by 10% or more. This can mean paying hundreds of euro more per year if you don’t shop for best value. www.pumps.ie provides a wealth of information from forecourts all over the country. And the best thing is that the quoted prices are supplied by drivers. One thing to watch though is to make sure you check how recently the information was updated. In most of the petrol stations on the busiest routes, prices are updated frequently but petrol stations on less travelled roads may be updated less frequently.

That’s it. I hope these can provide you with a little assistance as you plan your money costs for 2017. In the meantime, happy comparing and Happy New Year!

Despite the Defined Benefit risks, pensions still make sense

By: Frank Conway

If one thing is certain in pensions, it’s this; risk is never far away.

And when it comes to defined schemes, whether Defined Benefit (DB) or Defined Contribution (DC), risk is an inherent feature of what pensions are all about.

Protecting and growing personal wealth

Protecting and growing personal wealth

But DB pension schemes never really made actuarial sense.

Unfortunately for those that relied on them, realising that DB schemes were often built on a foundation of sand came too late. In some cases, beyond the point where they could hope to make up the massive financial black holes their pension pots became.

But all is not lost.

Pension contributions still make a lot of sense. And although DB schemes are on the decline, the rise in DC schemes do make a more realistic replacement option, provided a number of things happen first.

Earlier the better

For anybody in their 20’s today, now is the time to start their own super-saver pension account. I call it a super-saver because of the enormous potential to pack money away and grow it over time through the compounding effect that pension contributions benefit from. And the earlier that one starts one of these accounts, the greater the magic of time.

Let’s take someone in their 20’s, they can pack away 15% of their income (income threshold limited of course) using tax relief and employer matching options which means that even if they take just 5% of their gross salary and receive a 5% match from their employer, they will have doubled their savings, before  the tax relief even kicks in. This is why I call it a super-saver account.

But that’s not all.

Aside from the tax-relief benefit, the money can grow over the years without incurring any tax liability. To put this into perspective, Government usually charges anywhere from 41% on interest income (DIRT) to 33% on capital gains tax. So the offer on saving in this case is extremely generous indeed!

Fees really do matter

But before one gets the idea that all investments are the same, they are not!

First off, one must consider the impact of the investment philosophy. Is an active or passive approach being used and what are the risk-ratings?

I would always encourage a high degree of stock market investment using a mutual funds approach, even in post retirement. The cash amount can be increased but if one expects to live another 20 years in post-employment (or post full-time employment), that money needs to keep on growing!

But it is fees that are the most destructive to wealth growth…much more so than investment risk.

If we take a high-cost fees investment versus a low-fees investment over a 30-year period, the cost difference between fees of 3.5% versus 1.5% would equate to approximately 70% of potential fund growth over that time period (assuming for a 5% annual rate of growth). With high fees, fund growth would be marginal at best and even negative depending on the total cost of fees and charges.

Changing market and better opportunities

Despite a lot of negative news on DB schemes (trust me, there will be more), consumers today can grow retirement income wealth significantly via the DC options (and AVC additions) provided they capitalise on stock market options, plan long-term and control management fees. If they do, they should be in a good position to enjoy their retirement years in relative financial health.

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