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The great cover-up

High-profile companies continue to announce job cuts, while small to medium businesses are dropping like flies. The Government’s unemployment statistics show an increase to well over two million is likely, so its initiatives are focusing on keeping these rises under control.

It goes without saying that people are becoming more nervous than ever about losing their jobs and, obviously, being able to meet their requirements to repay mortgages and protect their homes.

With repossessions on the rise again – a major effect of the credit crunch – enquiries for unemployment cover have increased also. MPPI and PPI plans are being sought in vast numbers and insurers are getting twitchy.

How twitchy? Well, some more than others.

When HBOS announced its Lloyds TSB takeover a few weeks back, enquiries from clients came in thick and fast. Can we help? How much will the cover be? Can I get it at all? Enquiries to two insurers yielded the following result – if the client works for HBOS they cannot have cover.

To me, this seems downright unfair. To hedge your insurable bets to the degree that you will not accept any client who works for HBOS just because there may be possible, but not definite, redundancies as the result of a merger, is not treating customers fairly.

I could understand it if potential customers had been notified of specific redundancies by HBOS but this was not the case at the time. Exactly which departments would be affected had not been announced.

In my opinion, this approach by some major insurers stinks.

At a time when rising pressure on the state benefits system has resulted in a tightening of the criteria people must meet in order to get financial assistance from the Government, clients who actually want to take responsibility and not rely on the state are now penalised just because an insurer gets jumpy. How fairly have they been treated? Not very.

It is clear in any unemployment policy that you are unable to apply if you have been notified of any possibility of unemployment; applicants are asked to disclose this during application stage.

So while some insurers stated they would not cover an HBOS employee, as there was a risk, another said they would as long as specific job cuts had not been announced.

L&G’s MPPI policy states that to be eligible for unemployment cover “you must not have known of any possibility of losing your work”. There are always possibilities, but define that please.

Later in the policy document it states you can’t claim if “you knew or should have known on or before the start date that you might become unemployed”.

Axa’s unemployment cover states you are not covered “if the possibility of unemployment was known by you at the time this policy was taken out”.

Relating both of these examples to poor HBOS employees, Axa’s plan seems less forgiving, as any possibility of unemployment is ruled out.

Do they think there isn’t a possibility any day of the week of a company cutting staff for cost savings and efficiency? For L&G, it’s about reasonable knowledge of possible unemployment.

The difference here is that one company is hedging its bets very close to its chest while the other is relying on a client’s reasonable knowledge that they would likely be affected by redundancies.

I’ll take the second one.

Duncan McMillan is head of sales at LifeSearch


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