Are financial services providers discriminating against the over-55s? Regulators in the UK seem to think so and have launched a review of how older people are treated. Indeed a preliminary report from the UK's Financial Conduct Authority on the issue found that older customers could be discriminated against because of their age, or excluded from certain services and advice if they were not online.
Here in Ireland an ageing population is facing a similar challenge: disappearing bank branches, a move to transact business online and limited transaction services available in remaining branches. Remember the outcry last November when Bank of Ireland announced plans to streamline its in-branch services?
A survey from the National Council on Ageing and Older People (NCAOP) a number of years ago found that there was a widespread view that older people, especially those over retirement age, are treated less favourably by the financial services industry.
This view translates into complaints. Last year, the Financial Ombudsman received some 3,667 cases, of which 13.4 per cent were from people in the 65 and older age group – the greatest number of complaints (39 per cent) came from the 45-64 age group.
The majority of complaints from older people were related to issues with insurance products, followed by banking and investments, with 16 per cent of complaints relating to bank accounts, followed by life insurance products (13 per cent), mortgages (12 per cent) and investments (9 per cent). Maladministration was the biggest problem behind these complaints, with repudiation of claims and mis-selling other common issues.
So how might older people be missing out?
Missing out on deals
One aspect highlighted in the recent UK report is how older people may not be able to access some of the best deals. Take savings for example.
Yes deposit rates may be on the floor. That’s even more reason why an extra couple of basis points can make a difference in the long run. The problem many older savers face is that the best deals are only available online. And while many over-55s are more than comfortable browsing for offers on their tablet or smartphone, many others aren’t.
This means that they could find themselves excluded from some of the better deals on the market which can’t be accessed through their local branch.
As PTSB asserts: “You can only open online accounts by using the internet within our OPEN24 Service and you are a registered user. Once opened, you can transact on your account by using our internet and telephone banking services. You cannot transact on the account by visiting our branches.”
AIB, for example, pays 0.4 per cent on its 12-month fixed-term deposit account. If you take out the account only, a slightly better rate of 0.5 per cent applies. Similarly its online notice seven-day account offers 0.1 per cent to in-branch customers – or 0.25 per cent for online users.
KBC’s 1.05 per cent instant access rate is only available on its smart move online account (or 0.85 per cent in branch), while Permanent TSB’s online instant access account pays 0.05 per cent in-branch or by phone, but 0.15 per cent online.
Access to specialist savings banks can also be difficult. Rabodirect has no branch in Ireland, while Nationwide UK has just one branch, on Merrion Row in Dublin.
Mortgages
We’re living longer – and soon we’re going to be working longer too. The State pension age recently increased to 66, and is set to rise to 68 over the coming years. And yet lenders have yet to refresh their lending policies.
Typically banks impose an age limit on the term of a mortgage. Bank of Ireland for example, imposes a maximum age of 70 on mortgage lending, while AIB allows a 35-year term provided that the mortgage is cleared by the person’s 66th birthday, and will not assess a mortgage based on pensions or any other post-retirement income.
This is despite the fact that some over-66s will be in a far stronger financial position than their younger counterparts. One issue highlighted in the FCA report is people being turned down for mortgages because of perceptions about affordability. But it’s not just about taking out a new mortgage. The rules also apply to switching, and banks will be loath to take on a new mortgage – even if it’s for a small amount that the customer can well-afford – or extend the term of a mortgage if the customer surpasses the bank’s maximum lending age. This may mean that older property owners stuck on high mortgage rates have no option to switch to a cheaper lender.
Car insurance
Since 2012, insurance companies can no longer offer different rates of insurance to people based on their gender, under an EU law known as the gender directive. However, despite this move, insurance companies can still operate a derogation from equality legislation to offer different prices based on age.
“People have been expecting a similar case around age, but it has never happened,” says Scully. This means that insurance companies can charge car insurance customers more, depending on their age.
"You have to be quoted," says Gerard Scully, senior information officer with Age Action, but he adds that insurance companies are still allowed to discriminate on the basis of age, provided that they can show actuarial evidence demonstrating that they were acting on a commercial basis, rather than just discriminating against older people.
However when asked to provide such evidence, insurance companies can side-step the issue by asserting that the information is “commercially sensitive”.
“Most car insurance companies immediately start putting on extra premiums when the older person turns 66,” he says, adding, “Some older people have to give up driving because they can no longer afford it.”
However, as our table from Chill.ie shows, shopping around can diminish the extra loadings you may face if you’re older.
Another issue raised by members of Age Action is that, once you pass the age of 70, you must get a medical to show you can drive, and can only get a driver’s licence for a maximum of three years.
“But there is no quid pro quo for insurance companies,” says Scully.
Health
Until last year, health insurers couldn’t charge customers more for their cover on the basis of their age under so-called community rating. Last year, saw the introduction of “Lifetime Community Rating”. People aged over 35 who take out private health insurance cover for the first time will pay a premium. And the premiums are steeper the older you are.
The largest loading – 70 per cent of the policy price – can be added to the cost of a policy for someone aged 69 or over. This means a €700 policy will now cost them €1,190, or some €490 more than someone aged less than 35. Given the already sharp increases in the cost of health insurance seen in recent years, it could preclude many older, previously uninsured people from getting private cover.
While the loading may seem excessive at first glance, it’s small change compared with the amount someone who first started paying for private health cover at 35 or younger will have paid in premiums over the intervening years.
More problematic is the difficulty older customers may have in shopping around for the best health insurance deals. Older customers may find the best deals are not aimed at them, but at their younger counterparts.
As Scully points out, “Most companies would prefer not to have older people” A quick glance at the market share of the new arrivals in the marketplace shows their focus on younger customers. Aviva Health, for example, had a 16 per cent share of the 0-49 age group as of the end of 2014 but only 6 per cent of the over-80s, while Glohealth has a 7 per cent share of the younger age group but no customers older than 80. It’s only VHI, with its legacy business, which has a larger proportion of older people as customers. It had an 83 per cent share of customers in the over-80s group as of the end of December 2015.
Holidays
The summer is coming, but if you’ve celebrated a milestone birthday this year, you may find it a little bit more difficult to get cover travel insurance.
“It doesn’t really start affecting people until 70 but then travel insurance starts becoming a problem,” says Scully, who adds that even fewer insurers are prepared to consider customers over the age of 80, especially for long-haul trips.
Often, you might find that pre-existing conditions will be excluded, or you will need your own private health insurance in order to get travel cover.
AIB, for example, will only give cover to the over-75s in Europe, while Insureandgo.ie, which offers travel insurance via Mapfre, will insure travellers up to 85 for a period of up to 31 days, but won’t offer insurance for those older than this.
VHI also offers it members, who are older than 80, a multitrip travel insurance product. Over 65s: What they complain about Investments Noreen, who is in her 70s, approached a financial service provider about investing €150,000 she had on deposit, but her money was locked into a seven-year risky fund.
The company could not demonstrate how an investment of €150,000 in the chosen fund could be considered suitable for someone in Noreen’s position. Noreen was awarded compensation of €50,000 as the Ombudsman ruled that she bore some responsibility for taking out the investment in the first place.
Travel insurance Patrick, who is in his late 70s, was refused cover on one part of a trip to Australia when he fell sick in Bangkok, and so he returned home. However the insurer refused to repay the cost of the lost flights. The Ombudsman ordered the company to refund the cost of the four flights and pay an additional €150 in compensation
