Insurance hikes inflict more pain on households
Consumers snowed under by debt as big freeze and bank rate-hikes take toll
Published 28/02/2010 | 05:00
HARD-pressed, cash-strapped consumers face soaring insurance bills due to the appalling winter weather, higher bank charges for borrowers, and even likely hikes in the interest rate charged when they flash the plastic to cheer themselves up with a bit of retail therapy.
In a gloomy week for people struggling with wage cuts and juggling to pay bills, it emerged that thousands of homeowners facing mortgage rate increases who might want to switch their mortgages to AIB -- the biggest bank in the country -- can't do so as the bank has barred mortgage switchers.
But the biggest blow to consumers came as homeowners learned they will likely have to pay twice as much when they renew their house insurance this year leading to the Consumers' Association warning that people will be unable to afford house insurance.
Arctic weather conditions and monsoon-like floods in November and January cost the insurance industry €541m -- and firms plan to pass this on to customers.
The bill included €244m for the floods and almost €297m for claims payouts after the Big Freeze.
Irish Insurance Federation chief Mike Kemp warned that the enormous claims would inevitably lead to higher premiums. Just how much is yet to be seen. Mr Kemp wouldn't be specific but said he "wouldn't be surprised" to see rises of as much as 20pc.
However, other industry figures said the rises could amount to 35-40 per cent in the coming months.
"Someone renewing their policy over the summer could easily see their premium double," said one industry insider yesterday.
Mr Kemp warned: "Premiums will follow claims, whether they go up or down." Homeowners in some flood-prone parts of the country could also find it difficult to get cover."
As consumers were still reeling from this news, Bank of Ireland customers had a further jolt as the bank is to raise the interest rate it charges its customers on overdrafts, personal loans and student loans.
The hike came three days after the taxpayer took a 16 per cent stake in the bank.
The bank is also to cut the interest it pays to customers who remain in credit on their current accounts.
The interest rate it charges personal customers for an overdraft is to rise from 13.7 per cent to 14.8 per cent, and unauthorised overdrafts will be subject to interest of 22 per cent.
The new higher rates take effect from April 28. Its rival, AIB, meanwhile said it was no longer interested in people who want to switch their mortgages to them, such as people with Permanent TSB, which has increased its mortgage rates twice in six months.
The bank, which has got €3.5bn funding from the State, said its priority was funding new buyers who borrow less then 92 per cent of the value of the house, and who show "a capacity to repay". New figures also showed that consumers are so cash-poor that every €1 in €10 owed on credit cards is not being paid back.
Some €283m in credit card debt was written off by providers last year after consumers defaulted on their payments, according to banking research firm Lafferty Group. Andrew Neeson of the firm said the huge losses being suffered by providers meant it was likely they would hike credit card interest rates.