Jill Kerby

AS WAITING LISTS FOR CHILDREN GET LONGER MORE PARENTS NEED TO CONSIDER HEALTH INSURANCE

In a reply to a Dail question last week, the HSE stated that 54,789 children were waiting for an outpatient consultation at the end of May.

Of that number, 17,639 have been waiting for the appointment for more than a year and 10,541 for at least 18 months. 2,000 of those children have been waiting for a year to see a heart specialist. The number of “long waiters” – waiting for more than 18 months with conditions that include orthopaedic, heart and vision problems have soared 17-fold since 2016.

In the specific case of eye problems – often quite minor - the HSE admitted in January that over 18,000 children have been waiting for “some period of time” for ophthalmic treatment, with about 10,000 of them waiting longer than 12 months. 

Meanwhile, 235 children with scoliosis are still waiting for orthopaedic surgery. So urgent are their cases that the HSE is transferring some of them to UK hospitals.

The list goes on, caused by a shortage of consultants paediatricians (there are only 382 in Ireland and another 205 registrars and trainee registrars) and hospital beds. The management of the HSE has not kept up with our overall growing population.

So what can parents do to avoid long treatment queues, and serious conditions, let alone minor ones like an eye squint, constant throats infections, worrying posture, hearing or dental problems – becoming much more serious ones?  

The most obvious solution in a country with a two-tiered health system is to buy private health insurance for your children when they are healthy. (Pre-existing conditions are subject to waiting times.) It is not expensive at c€250 a year for a very good policy and even less than €150 for a very basic one.

Which is exactly what I tweeted last week (@JillKerby) in response to these latest worrying waiting lists.

The usual nay-sayers were onto me quickly: not everyone can afford even that amount, one tweeted, (though I had already noted that private health insurance is clearly unaffordable if you are long term unemployed, homeless, or in serious debt.)

But I also added that even where a family cannot afford to insure adults and children (a child must be linked to an adult policy) a grandparent, godparent, other relative or even a friend can add your child to their plan and you then reimburse them the €250, an sum “that everyone can save over the course of a year.”

I also received an interesting response from a GP: “Even having private cover wouldn’t help as there are no private paediatric hospitals. Also, most of my patients only use their private cover for diagnostic tests because they can’t afford consultation fees for consultants.”

This doctor was correct in that there are no private paediatric hospitals. Nor are there private rooms at the children’s hospitals except for isolation cases. But privacy isn’t why parents buy private health insurance; they buy it to get timely access to medical tests and treatment and to avoid the endless, waiting lists and the frighteningly high rates of infection in public hospitals. 

I checked with both health insurers and some of the 19 private hospitals about their paediatric services.  Nearly all of them offer a range of general and specialist paediatric services, mostly outpatient diagnosis and treatments for children usually aged up to 14-16.

Nearly all of the hospitals in the Bonsecours group have paediatric consultants on staff and the Cork hospital even has a paediatric ward. The Mater Private, Blackrock and the Beacon Hospital also offer extensive services, including overnight surgical treatment for children. The bigger hospitals also offer daytime A&E access. The private mental health services hospital, St John of God’s in Dublin, has a dedicated adolescent unit, the Ginesa Suite.

Most paediatric private consultants are also attached to the public children’s hospitals – there are only 10 exclusively private paediatricians operating according to the HSE’s 2017 Review of the Paediatrics and Neonatology Medical Workforce in Ireland.

The sickest children nearly always go to the top of the queue. But the only way you can ever know if your ill child will even be able to avoid the  horrendous waiting list to even be diagnosed, is to ask.

Your insurer or broker can tell you exactly what access and benefits your existing plan pays. The private consultant, hospital or clinic can outline exactly what the charges will be.  As the GP on my tweet-line suggested, you may have to dig a little deeper to cover all medical expenses that are not covered.

But if you have a family and have no health insurance, but think it might be a good idea, your first step should be to contact a good, specialist broker. With c400 different plans on offer only a broker can find you the most affordable and suitable plan (which might even include a cheaper cash health plan like HSF.ie) for the family, or for individual family members.

(The TAB Guide to Money Pensions & Tax 2018 is available in all good bookstores. See www.tab.ie for ebook edition.)  

GOVERNMENT INSURANCE LEVIES: EXPENSIVE, SELECTIVE TAXES

There are two prevailing myths that both the government and its critics persist in repeating:  that taxes are coming down and that Ireland is a low-tax economy.

The latest example to blow another whole in these assertions is the new 2% ‘levy’ that will be added for the next seven years to every motor insurance policy as a result of the bailing out Setanta Insurance, the Malta-registered company that went spectacularly bust in 2014. This brings to 7% the total levies – aka taxes – that motorists will now pay as Setanta joins the PMPA and Quinn Insurance on the plinth of the reckless insurers that our regulators failed to regulate but then bailed out at our collective expense.

As my colleague Charlie Weston, the tenacious personal finance editor of the Irish Independent noted last week, this latest bailout sends a message to every reckless insurer, even those registered in a different country:  don’t worry, ‘pixie Irish consumers’ will pick up your tab.

The 7% motor insurance levy is just the latest member of the ugly Irish Levy family. 

Every buyer of general insurance – of home, travel, personal liability, commercial and even pet insurance already pays the 3% levy cum stamp duty born out of the PMPA collapse in the 1980s plus the 2% levy added to cover the €1.1 billion worth of claims after Quinn Insurance went bust in 2010.

The Setanta levy is expected to add €50 to a €750 annual motor policy on top of the €50 of every premium that the insurance industry says is already allocated to pay for fraudulent insurance claims.

Meanwhile, anyone who pays into a life insurance policy, a savings or investment plan, an income protection or pension plan, also now pays a 1% levy.

The Levy family has other branches too:  private pension fund holders (ie., c800,000 when AVCs that are held by public servants are included) paid a c0.75% levy on the annual value of their pension funds between 2010-16. The Government collected €2.6 billion, ostensibly to bring down the VAT rate for the hospitality industry during the darkest days of the Great Recession. (Tourism is booming again, yet the VAT rate remains at 9% and private pension holders are unlikely to ever see their lost retirement savings.)

Meanwhile, over two million holders of private health insurance pay annual risk equalisation levies of up to €135 for a child’s policy and €399 for an adult policy.  And since 2015 a 2% lifetime premium loading that was described by the then Minister for Health as a “late entry levy” is applied to every policy-holder who waited until age 35 before they bought their first health insurance plan.

Finally, let’s not forget the PSO – Public Service Obligation – a levy of €15.38 that every electricity user pays every two months (€7.69 x 2). The government claims this payment to the green energy sector, “supports the generation of electricity from sustainable, renewable, indigenous sources”. (It has been proposed to reduce this levy to €4.26 per month from next October.)

What the government decrees…we must pay.

With the exception of pensions and health insurance, which both attract tax relief, levies/stamp duty are paid out of after-tax income but the government would still probably argue that with the exception of motor cover and the electricity PSO, no one is forcing you buy travel insurance, or home insurance if you are mortgage free.

Nor is life insurance or private pensions compulsory - yet. But it’s a very foolish parent who declines to buy sufficient life insurance and a very optimistic private sector employee who thinks that the State Pension (itself compulsory) is going to be sufficient in 30 or 40 years time to meet the cost of their retirement.

That said, anyone who doesn’t really need to own a car – single people who can walk or cycle to work; older people who use it seldom and/or who live near good public transport or can use a taxi instead (which even on a daily basis is going to be cheaper than car ownership) can all avoid the 7% car insurance levy.  Being car less means they don’t have to fume anymore about how c€50 of their annual premium goes towards the cost of fraudulent claims.

Better still, if like me, you have a GoCar parked on your city street, you can completely avoid nearly all the equivalent annual costs of not just the insurance and the 7% levy, but the car tax, petrol, maintenance and parking …in exchange for a mere  €8 an hour rental charge.

Levies are blunt force instruments. No matter how temporary, they never seem to disappear. Unless you have substantial means and can self-insure every unexpected outcome, like a huge travel/medical bill in America or can live your life by candlelight, we’re mostly stuck with these annoying, selective taxes.

(The new TAB Guide to Money Pensions & Tax 2018 is now out. See www.tab.ie for ebook edition.)  

INERTIA IS EVERY RETIREMENT WANNABE’S WORST ENEMY

Procrastination and inertia come at a cost. Fewer than 40% of private sector workers belong to a pension scheme or have a private plan of their own.  For many, this is because their employer does not offer an occupational scheme (or a PRSA group scheme to which they are otherwise obliged) and they have decided they either cannot afford a private plan of their own (especially if they are trying to save for a home) or feel they have no need for one.

This coverage figure has been dropping for the last decade and the government claims to be committed to introducing a universal auto-enrolment scheme by 2023. 

It can’t happen soon enough, but our current, complex, multi-type pension system needs serious root and branch reform, all parties – workers, unions, employers and the Oireachtas need to be on board …and time is running out. 

Nearly an entire generation of young, and not so young workers are at risk of depending entirely on the pay-as-you-go State Pension when they retire, just as the older population of Ireland is rapidly increasing. 

Irish Life, the country’s largest private pension provider has recently produced data from 2,000 Defined Contribution pension schemes which they administer for about 60,000 members.

The findings of this “Better Company Pensions’ report are alarming. The average age at which workers are starting a company pension is 37, but annual contributions from the worker and employer only amount to 11.4% of their salary.

As the table below shows, delaying funding a pension can have a hugely significant negative impact on its final gross value (the Irish Life figures do not take account all costs and charges and the net value will be considerable.)

The pension value examples in this table assumed that the worker and company contribute 11.4% of salary each year beginning at ages 25, 35, 45 and 55. Retirement age is 65 in each case. Each worker’s salary grows each year by 2% (starting from a base of €51,250 for the 25 year old, which seems high given that the average industrial wage is c€39,000.) It is assumed that the pension fund itself grows by 4% gross per annum.

The person who only starts their pension at 35 (which is two years younger than the average age Irish Life has noted) will be starting their contributions out of a salary of €62,474, due to the annual wage indexing that has applied. Their final gross pension fund at maturity will be €311,590, about €150,000 less than the pension fund of their 25 year old colleague who, even though on a much lower salary when they started saving, had a 10 year head start.

Using these assumptions, the 35 year old can expect a gross income of €11,780 a year for life, while the 25 year old, can expect an income of €17,490, nearly €6,000 a year more.

The picture is even worse for the 45 and 55 year olds who start their pensions much later with only 20 and 10 years respectively for their funds to grow. Not only do they have far less time for time and compound interest to do its magic, but they will need to be even more careful about the kind of investment risk being taken:  they may not have sufficient time to make up the periodic losses that are inevitable in investment markets.

Costs and charges and commissions will also inevitably eat away thousands of euro every year from their fund; these costs will have a disproportionate effect on pensions that are started later.

The single two most important factors in producing a satisfactory retirement fund and income, independent financial advisers and planners agree, is that you start saving as early as possible, that is, from your first paycheque and that you save enough. 

A 25 year old who puts away at least 10% of their gross income into a well-diversified, tax deductible, low cost investment fund for their entire working life (which could easily end up being 50 years) and who ideally also enjoys a employer contribution, is unlikely to ever have to worry much about a comfortable retirement, no matter how volatile the markets.

*Source: Irish Life, 2018

GARDA INSURANCE FRAUD UNIT WELCOME BUT WON’T BRING PREMIUMS DOWN RIGHT AWAY

Being the victim of someone else’s fraudulent insurance claim is not very pleasant.

Less than a year after I learned how to drive, I unfortunately bumped into the side of another car as we were both moving into (me) and off (him) a wide yellow crossbox one wet, late December afternoon.

Since we were both only inching along at less than 5km an hour, my left – undamaged - front bumper left a small dent in his left back passenger door.  The worse damage we inflicted was further snarling up rush hour traffic until we could both pull over to the side of the road.

I was devastated. We exchanged insurance details; I was clearly in the wrong. But the damage was tiny and if I had known, I would have offered to pay the damage from my own pocket rather than involve my insurance company. Nor did I call the Gardai, or look for witnesses, so minor was the altercation. I did notice however that the other driver’s car was old and rather banged up, with lots of little dents and scratches. I was mistakenly consoled by this.

I filled out the insurance forms but was outraged when I was informed that the claim – for over two thousand pounds - had been approved, seemingly without any second thought by my insurer.  Despite reminding the claims official of my description of the accident, he blithely replied that “small claim” were pretty much just rubber-stamped and disputes weren’t worth pursuing.

That was 34 years ago.

Who was at fault here (aside from me?)  The other driver for hugely exaggerating the damage to his already battered old car, or the insurance company for blithely paying up because the alleged cost of the damage was, in their view, inconsequential?

Last week, the Irish general insurance industry (you and me, again) agreed to fund a new, specialist Garda unit that will cost €1 million a year to investigate insurance fraud. 

The unit will be focussing on the big staged motor accidents (You-Tube is full of recordings) orchestrated by both individual criminals and organised crime gangs that result in exorbitant personal injury claims.

 It isn’t just motor fraud that is contributing to an estimated extra €50 cost per every insurance premium in Ireland:  small businesses are targetted too by customers (and employees) claiming they’ve injured themselves on the premises or at their workplace, usually by falling on wet or greasy surfaces they arranged themselves, by ‘accidentally’ falling down stairs (especially in pubs, nightclubs and restaurants) or by burning or cutting themselves, etc. 

Insurance fraud costs an estimated €200 million a year but the new 12 person insurance fraud unit will be kept so busy that they are unlikely to end up investigating very many of exaggerated claims that ordinary homeowners allegedly make when their home suffers damage or they experience a break-in.  The only thing these people might worry about is a guilty conscience. 

(The addition of no-claims bonuses to household policies – like the kind that apply to motor policies would help reduce exaggerated claims, a broker told me: “Even a small claim is likely to result in a huge premium jump, so people think, ‘I might as well gild the lily’.”)

One industry expert, Jonathan Hehir who operates a number of general on-line insurance brokers including Insuremyshop.ie and Insuremyhouse.ie said the more fraudulent claims, the higher premiums will increase.

“It’s encouraging to see the industry work together to combat this growing epidemic and if the UK system is emulated, as is the intention, then I would be confident that it would have an almost immediate effect of reducing the instances of claims – which will then have the knock-on effect of reducing premiums.”

This isn’t the first effort to reduce dodgy claims. In 2003, at the peak of the Celtic Tiger, Insurance Confidential, an initiative by Insurance Ireland, invited people to report suspected fraud to them.  Its motto was ‘Insurance Fraud is not a victimless crime’. It claims “thanks to the effort of the public it has helped prevent thousands of fraudulent claims to date.”

That may be so, but the situation is worse 15 years later, says Jonathan Hehir: “The scale and resources are simply not enough to deal with the level of fraud the industry now has to contend with, and the involvement of the Gardai on a larger scale is absolutely necessary,” He adds that his staff are all trained to recognise signs of fraud.

The cost of motor insurance had gone up by about 70% over the last 5-6 years. Premiums have fallen back somewhat in the last year but there is no similar evidence for home and shop insurance. Adding another €1 million a year to the industry’s costs – while very necessary – doesn’t augur well for a quick fall in customer premiums. 

This is just another ‘don’t hold your breath’ event.

(The new TAB Guide to Money Pensions & Tax 2018 is now out. See www.tab.ie for ebook edition.)  

ENGAGED COUPLES ARE DISCOVERING THAT SYNTHETIC DIAMONDS REALLY ARE FOREVER

It’s wedding season and the weather couldn’t be nicer for those brides and grooms tying the knot this weekend.

Luckily the only invitations I’ve received so far this summer are for engagement parties.  Long-time readers of this column know that while I delight in sharing the actual wedding service, I’m not a fan of traditional receptions, especially the kind that go on for days and happen in foreign locations.  (Even worse are the ones with invitations that crassly suggest cash gifts instead of presents. Call me old fashioned, but I’m not sure you’re a genuine ‘guest’ when you end up paying towards your meal or the bride’s dress.)

Summer engagement parties, on the other hand, are lots of fun, either hosted in a family back garden, hotel or the local sports club. Only close family and friends usually show up and the food, music and speeches are inevitably more informal. The speeches aren’t usually scripted. Best of all, the anxiety index is a lot lower, and the cost, bearable.

Which leads me to the very welcome recent announcement by the diamond sellers, DeBeers that they are going to start selling lab-grown diamonds that are expected to cost about a tenth of the price of their natural ones.

This is terrific news for newly engaged couples, who will hopefully abandon the absurd but wildly successful (until now) DeBeers marketing myth that diamonds command a huge price tab because they are not only ‘forever’ but rare too. 

Diamonds may be the hardest gemstone, but they are certainly not rare:  jewellery shop windows in every town and city on the globe (not to mention diamond cutting factories and museums) display endless numbers of diamonds of varying degrees of colour, clarity, carat and cut. Millions of women own diamond jewellery and while traditional diamond mines in South Africa are being worked out, new mines – like the DeBeers-owned Gahcho K’ue mine in Canada’s North-West Territories that opened in September 2017, is producing 2.4 kg of diamonds per day.

There is no shortage of jewellery or industrial-grade diamonds in the world. Which is why DeBeers has invested a fortune for the past 80 years of so in creating the myth that convinced generations of newlyweds that buying a diamond engagement ring was the only way to truly express their love and fidelity – as in, if the diamond was forever, so would be the marriage.

DeBeers are coming to the lab-created diamond business late in the day. Russian labs were the first to start manufacturing them several years ago and the South African company (which now only control about a third of world’s diamond production) reacted by saying they would engrave a DeBeers logo onto their diamonds so that retailers and buyers could be certain their diamond was ‘real’ and not synthetic.

Except there’s nothing unreal about synthetic diamonds, which are literally created from a genuine carbon ‘seed’ and put under immense pressure for a few weeks.  The brand new raw diamond is then cut and polished just like the ones formed after millions of years, deep in the earth.

The synthetic De Beers diamonds are expected to go on sale from this September under the brand Lightbox and prices will start at c$200 per quarter carat or $800 a full carat, instead of, typically, $8,000 for a natural carat stone of fine quality. Buyers then have to add the cost of the gold or platinum setting and other sales margins.

Demand for such affordable diamonds is sure to grow as this generation of engaged couples, who have reportedly already been eschewing diamonds for cheaper coloured stones (or no engagement ring at all), become aware of their existence. Instead of feeling pressured into spending two or three months of income on a diamond ring – another successful De Beers marketing ploy -– they can spend a tenth of that outlay and no one will be able to tell the difference.

Irish jewellers might want to start preparing for what will undoubtedly be a gradual shift towards buying manufactured or synthetic diamonds by many existing and potential customers.  Industry commentators predict that the price of real diamonds will inevitably come down.

Anyone who has ever tried to resell a diamond engagement ring knows only too well that they were very lucky to get even half the original price back; only exceptionally fine, rare stones with a sparkling provenance keep their value.

For the rest of us, the ring mounting - depending on how heavy and how pure the gold or platinum – could be worth more once melted down and sold, than the actual diamond.

(The new TAB Guide to Money Pensions & Tax 2018 is now out. See www.tab.ie for ebook edition.)