I recently had an interesting conversation with someone that’ll lead to a few posts here on ValueIreland.com in the coming weeks. The first of these was where they introduced me to the “Shoparound Index”.
The “Shoparound Index” is used by the AA in the United Kingdom as they believe that it better illustrates how the cost of insurance is increasing or decreasing compared to any published statistics that take just the first quote presented in any research.
Given that most of us won’t take the first quote we receive for any insurance renewals we get (should be all of us), we’ll make a couple of calls to see if we can get a better offer elsewhere.
On most occasions, we’ll actually find that our own insurance company will actually reduce our renewal quote on the first call without any qualms or pushback at all.
It makes sense therefore, that any insurance costs that are included in any published statistics should be an average of a few quotes rather than taking the first quote which will nearly always be higher – sometimes by upwards of 10-15%.
Take, for example, the cost of insurance as published in the recent CSO Consumer Price Index information for June 2009 ( I haven’t had a chance to check the recent report but I believe the numbers referred to here continue to be relevant for July).
This table indicates that in the past 12 months that home insurance has increased by nearly 25%, health insurance by 21% and car insurance by just over 13%.
I’m waiting for feedback since early August from the Central Statistics Office as to how they calculate these insurance cost increases – whether they’re based on a single insurance quote request, or whether they take an average of 3 or more quotes.
As of now, if we were to assume that they don’t take an average of 3 lowest quotes, it’s quite reasonable to assume that insurance costs haven’t increased as much as is indicated above and that since these are the biggest increases across all components of the CPI, then our deflation rate could actually be higher than is reported.