In light of this and the Bank of England’s recent ‘deep recession’ comments, Payment Protection Insurance specialist, Sara-Ann Burgess, suggests a nationwide campaign is needed to help people at risk of redundancy protect their finances and homes.
She comments: “The figures released from the Office of National Statistics do not take into account redundancies announced in January and senior economists at the Institute of Public Policy Research suggest unemployment will rise above 3 million this year. In January, the number of people getting Jobseeker’s Allowance was 1.23 million, indicating that nearly 40% of those without jobs do not receive State support.
“Thousands are already struggling financially and worrying about how to pay next month’s bills and if they do have any savings, they’re severely depleting their funds. I fear thousands more will be in a financial crisis if they do not take out some form of Payment Protection Insurance before it’s too late.”
PPI provides monthly cash benefits for up to a year in the event of unemployment, but will only pay out if the policy is taken out well before any job losses are notified. Policyholders who were aware of any impending unemployment as a result of announcements or mergers/restructures before they purchased cover, or within four months of it being taken out, will have their claims rejected.
Sara-Ann continues: “And this is why it’s so important to purchase cover now, before the situation gets worse. Claims figures show that very few people use this insurance to help them through a crisis which means that people are either unaware of its existence, costs and benefits, or they’re not worried about the dire employment situation.
“The Association of British Insurers says 19,105 PPI unemployment claims were made in November 2008, up 118% on the previous year. But this is miniscule when you consider the number of people out of work at that time.”
The ABI figures as a percentage of 1.97m unemployed from September to December indicate that less than 1% of those who have lost a monthly wage now draw a ‘salary’ via PPI.
“This is deeply concerning,” says Sara-Ann. “All those millions of people without a financial cushion to help them at a time they need it most. Jobseeker’s Allowance is only £60.50 a week for a single person and £94.95 for a couple, so this won’t go very far in helping people meet their monthly financial commitments.”
Low claims figures at a time when unemployment is at a 12 year high can be attributed to the fact that the PPI sector has a poor reputation and people are suspicious of providers who are responsible for record volumes of complaints to the Financial Ombudsman Service and have been investigated by the Competition Commission.
Sara-Ann concludes: “I’m amazed that over 99% of unemployed people are not able to benefit from monthly payouts, courtesy of insurers. Not all PPI providers should be tarnished with the same brush – there are many independents offering low-cost policies with comprehensive benefits and support services. I urge anyone currently employed to ‘seize the day’ and ensure they have a second salary source, via PPI, should redundancy occur.”
Premiums are calculated per £100 of benefit and standalone firm British Insurance charges £3.40 per £100 for unemployment cover. Anyone looking for a monthly replacement income of £500 would pay £17 a month. British Insurance has won numerous awards for its products, back to work assistance programme and service delivery and has policies for homeowners, those renting and people in shared ownership schemes.
