Thousands of City workers are now being denied unemployment cover or facing premium increases of up to 200 per cent on new policies, as insurers limit their exposure to the troubled finance sector.
With the credit crunch taking a tighter hold on the economy, job losses are forecast to run into the hundreds of thousands over the next few years. But many workers most in need of a safety net in the banking, insurance and general finance sectors are considered too risky by insurers.
Brokers say that, in the past month, some insurers have withdrawn their stand-alone unemployment cover or removed the redundancy element from wider protection plans.
“Some investment banks have been placed on a blacklist and if workers from these companies came to us, I could not help them,” said Simon Burgess at British Insurance, a specialist unemployment insurance broker. “On the whole, it is harder to find cover. We are declining twice as many applications now, mainly from the finance sector.”
Iprotect, a specialist broker, has always excluded estate agents and workers in the housebuilding and finance sectors, believing them too high risk for job losses. “Without any doubt, certain underwriters who were taking on these high-risk clients have been tightening up their criteria,” said Dennis Haggerty, marketing manager with Iprotect.
Unemployment cover, commonly sold with accident and sickness cover pays out an amount per month for up to a year. It can be linked to mortgage repayments or other debts.
Technically, anyone can apply for unemployment cover as long as they do not have prior knowledge of a redundancy or restructuring programme at their company.
But in a further sign that insurers are limiting exposure, many underwriters are refusing to take on new clients from companies with a troubled past.
“We recently had a customer who was declined because the company had redundancies, but they were a while back,” said Bob Cook of Platinum Insurance. “Underwriters are taking much longer to process applications as they are getting data on the company’s financial stability.”
Those brokers who were still able to place cover for high-risk workers reported steep price increases.
“I know of one insurer which raised its premiums by 200 per cent,” said Peter Matthews, managing director of UK Insurance Net.
Those now locked out of low-cost deals had no option but to go to a specialist broker. “Unfortunately, they will face steeper premiums and less choice,” said Mr Matthews.
