Money Times - July 8, 2012
Posted by Jill Kerby on July 08 2012 @ 09:00
Money Times, July 8
There were more than a few comparisons making the social media rounds last week between the elusive Higgs-Boson particle and Ulster Bank account balances.
The most popular tweet was that the physicists searching for Higgs-Boson should have switched their attention from their Swiss mountain tunnel to Ulster Bank’s banjaxed computer system.
The jokes may have been lame, but the inconvenience being experienced by Ulster Bank customers is anything but, and is now likely to continue for another fortnight. Some readers of this column tell me that there have been no normal transactions on their accounts since the computer fault began on June 19th.
As the backlog piles up, the penny seems to finally be dropping with people who have active current accounts that they need to start making alternative banking arrangements for their wage transfers, mortgage payments, direct debits, standing orders and credit card transactions.
This means opening a new account with a new bank or credit union, and writing to all the third parties that they will pay their bills manually once their next paycheque clears their new bank. Missed payments, they will need to explain, will be cleared once the Ulster Bank crash has been fully repaired and their Ulster Bank account – hopefully with their funds fully accounted for – is once again accessible.
If you are someone whose phone, light, heating and insurance bills haven’t been paid, as well as mortgage and credit card payments to other banks, don’t delay writing those letters.
You are going to need to keep a record of every failed transaction: if you think this computer fiasco has gone on too long already, just wait until the post-mortem compensation claims begin.
You might also want to reconsider your holiday plans: it could be a long summer for Ulster Bank customers and staff.
The arrival of GloHealth, the new private health insurance company should be just what the doctor ordered.
There are only three players providing private health cover to over two million people in a market that is worth €2 billion, compared to the 14 product providers in the €1.7 billion motor, home and travel insurance market.
The reason for this shortage of competition is because this is a mercilessly distorted market dominated by the continuing existence of the entirely state-owned, unregulated and loss-making VHI.
Approximately 400,000 VHI members have either cancelled their cover or switched to Aviva Healthcare or Laya Healthcare since this recession began, yet staff numbers and civil service pay rates have not been reduced and this loss-making company, the sole beneficiary of the €285 per adult and €95 per child member levy also maintains a hugely expensive defined benefit pension scheme.
GloHealth can only compete by targeting younger, more profitable customers who they believe also only want to pay for cover that they think is necessary.
They’re quite right to do so: why would a healthy young man want maternity benefits? Does a young family really need international health and travel benefits if the can’t even afford a holiday at home?
Under strict community rating rules that apply in Ireland, every plan has to be available for purchase at the same price regardless of the buyer’s age, sex or state of health, though waiting period, especially for pre-existing conditions apply. GloHealth fulfils all those requirements, even if the spirit of community rating is diluted by not making their three core policies particularly attractive for older customers – a trend that the VHI itself started when they stopped fully covering orthopaedic treatments like hip replacements in their most popular policies.
This new company isn’t going to survive in this contracting market on the switcher market alone. It’s going to have to attract new, first time members and they believe they can do it by simplifying their offer to three core plans they have named Good, Best and better rather than creating dozens of complicated ones now on offers from VHI, Aviva and Laya.
They’ve also promised that they’ll always be better value, which isn’t going to be easy if a price war breaks out, as some brokers expect.
I think consumers would be better served by everyone streamlining their product lines, and following GloHealth’s example by actually giving people the plans they want, and not just plans stuffed full of unnecessary, expensive benefits they can’t affor and may never use.
GloHealth’s arrival is very welcome, but the fact that Irish Life, which is now 100% owned by the state again, is a 49% shareholder in the new company, is not.
The government, in the guise of the Department of Health already owns the dominant health insurer and now, by default, nearly half of the newest one.
The VHI’s unfair, unregulated and protected status has always been the biggest obstacle to new entrants to this market and it should have been broken up and privatised 15 years ago when its monopoly officially ended.
GloHealth may have first approached Irish Life for financial backing when it was still a private company, but by default GloHealth now has as its single biggest shareholder the same people (in the civil service at least) that have resisted any breakup of the VHI, which has been described to me by two previous senior health insurance bosses as “their private fiefdom”.
The two million people who are increasingly worried about the public health service with its long queues and cutbacks and so voluntarily pay for private health insurance deserve better.
Introducing a property tax was always going to be contentious, but it comes as no surprise to hear that the Minister for the Environment’s preferred method of calculating what homeowners will pay will be based on the market value of their property.
A couple of very interesting site value reports, the best from Daft economist Ronan Lyons, showed how a land site value would be fair, sustainable and encourage the more productive use of land. However, a market value calculation is always quicker and simpler, and is easier to justify as a ‘progressive’ tax measure that targets the allegedly wealthy owners, which is why it is so common in places where property taxes apply.
Getting accurate values, in this defunct property market of course is going to be a nightmare. So will be the awarding of the tax exemptions after the lobbyists get their way.
Meanwhile, collecting the tax will make the debacle over the €100 household charge look positively benign.