UK Employment Uncertainty Drives Up Protection Insurance Premiums

As Underwriters discover how austerity measures by the Government will have adisproportionate impact on UK employment patterns, Income Protection Insurance and Mortgage Payment Protection Insurance will be more expensive.

The monthly Office for National Statistics figure for those ‘unemployed’ and claiming benefits is not the only factor that affects the price of Income Protection Insurance and Mortgage Payment Protection Insurance. For a while, this number could remain relatively stable. Cynics believe that for the next few decades there will still be enough unemployment to keep down the pay demands. But not enough to cause chaos in the streets. The gross number of people without work is not as important to the Underwriter when setting premiums for Income Protection Insurance and Mortgage Payment Protection Insurance. However, employment patterns will be relatively stable. This can be measured so that insurance rates for most people are competitive. Providers focus on offering the most competitive rates to people who have a greater than average chance of keeping their job or finding a new one in a static market.

Every economy changes with the development of new industries. At the same time, established companies reduce their costs by reducing their cost base. This is often done through automation, market consolidation, or simple shipping processes overseas. If market evolution is normal, and there were previously competitive products, then what has changed? The harsh reality is that the UK has been placed in the economic equivalent to The Priory by the new Government to reduce our dependence on public spending.

The steady growth of the economy and buoyant tax receipts have allowed public sector budgets to expand, particularly in Education and Health, for at least 15 years. A remarkable program of inner-city renewal has been implemented with numerous grants and contracts, which have spread Government spending across the economy. David Cameron declared his clear intent to balance the economy away form the public sector. The certainty of the existing employment patterns is being eliminated, particularly in inner cities that rely heavily on the public purse.

This will likely mean that government departments will have to reduce their workload to keep up with the reduced workload of the new administration. As the new administration shifts to outsourcing, we will see whole departments close down. A small group of supply chain managers could replace potentially thousands of civil servants.

This re-balancing creates uncertainty for the Income Protection Insurance Underwriter and Mortgage Payment Protection Insurance. Their job is to accurately predict employment patterns and redundancies across hundreds of industries at least two years ahead. The Underwriters then calculate the probable cost of claims and determine what premiums people will need to pay now in order to cover their claims for the next two years. At this point, the only certainty that the Underwriter has is the understanding that people working in the public sector will eventually leave their jobs and move to the private sector.

What number of new jobs in the private sector will there be for public sector workers who are out of work in this economy that is barely recovering? What extent can the skills of the individual be used in the private sector? These factors will greatly impact the time required for someone in this position to find new employment.

Many of the Underwriters have been employed in large financial institutions. They have witnessed significant change over the years due to mergers and acquisitions. These often resulted in savings of up to 10%. The government now talks about cuts of 25 to 40 percent in unprotected departments. It also has an impact on the private sector, as large public spending projects are canceled or reduced. These projects could cause further shock waves in the economy, reducing the number available vacancies.

Every Underwriter is certain that due to the magnitude of change, untold numbers will lose their jobs. They cannot predict how long it will take for those who are out of work to find a new job. Underwriters have to figure this factor because they are in unknown waters and, economically speaking, surrounded by sharks.

These are the questions that people are asking. “Have premiums gone up in the past year?” They have. “Will they rise again?” All Underwriters will be prudent when confronted with such uncertainty. “When can we expect things to improve?” The ‘new reality for UK employment patterns will be revealed. Only then can the Underwriters make an accurate assessment, and Protection Insurance rates will be stabilized.

Is it a good time to purchase Income Protection Insurance or Mortgage Payment Protection Insurance with so much change? Dennis Haggerty, Marketing Manager for on-line specialist commented “Yes it most certainly is. It will be more difficult for people to purchase Income Protection or Mortgage Payment Protection if they wait too long. There are still great deals. However, Local Authority and Civil Servant workers will need to pay more if they are able to buy the coverage. Because their future employment prospects remain uncertain, this is because they will need to pay more.

This type of insurance was discontinued by Lloyds Banking Group. Online offers far better value, but it does indicate that premiums will rise as fewer providers are willing to offer this coverage. From July 2010, whilst not increasing premiums, are now declining any further applications from people employed in the civil service or local authorities. This is an example how the market is changing in terms of who Underwriters will cover. For the vast majority of occupations, coverage is still available.

Dennis Haggerty FCII M IDM Marketing Manager specialises in the supply of low cost on line Lifestyle Protection, Income Protection and Mortgage Payment Protection Insurance.

The focus on providing a product selection that is exclusively online has been key to the success and growth of i.protectinsurance. i:protect is able to offer exceptional value by eliminating all costs associated with selling insurance. This includes commissions, middlemen, and telesales.