Insurers must not follow lenders and penalise customers says Burgesses
Insurers must not follow lenders by penalising customers when hard times hit, says independent protection specialist Burgesses.
The warning comes on the back of new government figures published last week that records unemployment surging to an 11-year high with the number of people out of work growing by 140,000 to 1.82 million.
The three months to September saw unemployment rise to the highest levels since the end of 1997. But the figures do not include recent widespread redundancies across the construction and financial sectors, let alone the near five thousand job losses announced in one day.
Burgesses fears that the rapid rise in the numbers of people losing their jobs will prompt insurers to withdraw some forms of specialist cover in an attempt to mitigate against an expected rise in claims.
Lenders have already attracted heavy criticism for hiking up rates on some mortgage products and credit cards at a time when the bank base rate is in sharp decline.
Sara-Ann Burgess, the managing director of Burgesses, said: “There is now a real concern that insurers will also look to put the boot into customers by seeking to withdraw valuable insurances like unemployment-only cover from the marketplace.
“Many major insurers have already gone down this route and my concern is that others will follow. That would be disastrous for the many thousands of people that will be considering buying peace of mind as we move into a period of economic meltdown.
“Insurers must resist the temptation to ape lenders by hiking rates or withdrawing this crucial insurance altogether. After all, these firms exist to offer policyholders protection in difficult times – not when everything in the garden is rosy.”
Employment prospects are increasingly gloomy with Capital Economics, the economic consultancy, expecting unemployment to peak in 2010 at around 3.3 million. The Government’s Small Business Forum yesterday warned of the prospect of many businesses going bust by Christmas.
But it is in car manufacturing that there is a real danger of the wheels coming off and putting many thousands of workers on the dole. New car sales in Britain have fallen for six months in a row and overseas orders have almost dried up.
Already most UK motor manufacturer has moved to short-time working and cut production levels and widespread redundancies are just around the corner. US giant General Motors is on the brink of going bust and it employs nearly 5000 people in this country.
“It is at times like these that people will look to the creditor market to provide peace of mind by offering relevant and affordable insurance solutions,” remarks Burgess.
“If it was to snub consumers by hiking prices or withdrawing cover it would dwarf the Millennium Dome
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