Banks v brokers… so who’s right in the home insurance rip-off battle?

Not shopping around can cost more than €13k over the lifetime of your mortgage

Banks are brilliant at flogging us other products when we take out a loan. Bank of Ireland sells mortgage protection cover to three quarters of its home-loan customers – while half of them also bought house insurance from the bank last year.

AIB and Ulster Bank are also highly skilled at cross-selling insurance products, while others are not far behind.

But do they offer their customers the best deal?

And what happens if they seek out a better one elsewhere?

Will it affect their all-important mortgage application, for example, if they buy mortgage protection from another insurer?

Brokers claim banks are pressurising customers into taking their insurance with dark hints about inevitable ‘delays’ or problems with their life-changing mortgage applications if they buy elsewhere.

We cover this murky business in more detail elsewhere.

Here we’ll see if some discount brokers’ claims that they offer a much better deal to banks actually stacks up.

MORTGAGE PROTECTION

First, mortgage protection cover – a pricey item that’s often overlooked as home-buyers deal with the more important issue of their mortgage application – and then it’s forgotten about for the 25-year term of the mortgage – an oversight that can cost you dearly.

When you get your mortgage the bank will give you a quote for mortgage protection cover from the insurer it deals with.

In Bank of Ireland’s case, this is New Ireland. With other banks, it’s usually Irish Life.

With many other competitors out there, it seems unlikely that these will automatically be the best deals.

Online discount broker LABrokers – labrokers.ie – has sourced some quotes for us this week, based on a couple with a €278k mortgage to show how the system works.

If this couple were with Bank of Ireland they would first be offered a quote from New Ireland for €104.82.

Otherwise it would be €115.74 through Irish Life, which deals with most other banks.

If these borrowers were savvy and insistent enough – and most are not – they wouldn’t simply accept the first quote they were offered.

They would ask the bank to source quotes elsewhere – which it is then obliged to do.

The bank would come back with the cheapest quote on the market – which was €97.72 from

Zurich when we looked this week. The couple would go away quite pleased with themselves for saving €5k over 25 years. But they could save more – much more.

John Geraghty of LABrokers, for example, said he could get this couple’s cover for just €72.68 per year.

The savings over the 25-year period of this mortgage could be staggering – €13,218 compared to Irish Life’s offering. HOUSE INSURANCE Banks appear to be up to the same tricks when it comes to house insurance.

Online broker insuremyhouse. ie, compared its prices with bank offerings on home cover.

‘There’s no doubt that banks are charging a premium for this product and our cost comparison supports this contention,’ said Insure My House managing director Jonathan Hehir.

Because home insurance prices haven’t been rising by much compared to car insurance, homeowners tend not to shop around.

But there are big savings to be made, said Mr Hehir.

The cost analysis undertaken by insuremyhouse.ie for this newspaper looked at five standard sample customers around the country.

The difference between what banks quoted and insuremyhouse. ie quoted amounted to up to €206 per year – or €5k over a 25-year mortgage.

We contacted all the banks mentioned in the survey. Two said there are ‘too many variables’ to comment on the survey.

They pointed out that they offer no-claims discounts and discounts for first-time buyers of up to 40% on home cover. Mr Hehir responded that the survey was done on a like-for-like basis with all insurers.

He maintained that banks charge higher premiums because home insurance is not their core business.

‘It’s just one of the many products and services they offer and so they don’t focus their attention on getting the best value for customers,’ he said.

‘My advice to anyone who already has a home insurance policy in place is to take out your policy details, look for your renewal date, and make a note of it in your calendar.

‘Then a few weeks before this date, go and search the market for the best value instead of letting the renewal date roll around and having to accept the new premium that your existing insurer offers you.

‘I would guestimate that approximately 70% of Irish people do nothing – and also that nine out of 10 of these people could get a better price if they took action.’

So there are better lots of better deals out there.

All we have to do is look!