Unemployment Protection Premiums to Rocket
Added: (Thu Jul 08 2010)
Pressbox (Press Release) -
Mortgage Payment Protection and short term Income Protection premiums are set to rocket as Underwriters digest 1.3m UK job losses are now forecast by the Treasury.
The impact of the budget cuts announced by the Chancellor George Osbourne will be felt most of all by the employees of private companies that had won recent tenders for major public projects. For example those companies who thought they would to be delivering the previous Governments flagship £55bn Building Schools for the Future programme. At a single stroke, the Education Minister Michael Gove cancelled contracts for 50% of these new schools. There are also thousands of contractors and subcontractors expecting to undertake work for other Government Departments and for Local Authorities who are now fearful the same fate awaits them. Treasury figures indicate between 600,000 to 700,000 jobs will disappear in the private sector by 2015 as a direct consequence of the cutbacks outlined in the budget.
Low cost provider of Accident Sickness and Unemployment Insurance (ASU), iprotectinsurance expressed dismay when learning of the forecast for 1.3 million job losses. It should be remembered that companies like iprotectinsurance pay out up to £1500 per month to people they insure who unable to work due to accident, sickness or unemployment. Currently some of their claimants take well over 6 months to get another job due to the high level of UK unemployment. Jobless figures for the first quarter were released by the Government in June confirming a rise to 2.47m (source ONS).
Responding to the Treasury prediction of 1.3m job losses, David Cameron said that 2.5 million new jobs will be created as a result of private sector growth by 2015. Unfortunately, for this to happen, the UK economy must grow at far more than 2% per annum. Because, unlike the Public Sector, efficiency in the private sector is remorseless, and consequently growth has to exceed 2% before any need is created for extra staff.
In view of the recession Mr Cameron’s statement would seem to be wildly optimistic. Indeed, John Philpott, chief economist at the Chartered Institute for Personnel and Development (CIPD), condemned this assertion and was reported saying "There is not a hope in hell's chance” when referring to 2.5m new jobs being created. The CIPD has estimated that there will be 725,000 jobs lost in the public sector alone by 2015, although John Philpott conceded the number would be lower if genuine public sector pay cuts are achieved. Unfortunately, the Unions including the strong Civil and Public Services Association will fight this tooth and nail.
Dennis Haggerty Marketing Manger for iprotectinsurance commented “George Osbourne’s budget cuts have created the perfect storm for unemployment. It is not just the number of Civil Service jobs that will be lost. The real worry is the knock on effect of the budget cuts in the wider economy, driving a fresh wave of redundancies in the private sector”.
Without doubt those made redundant will have to fight for a limited pool of private sector jobs.
Dennis Haggerty explained further ”It is the length of time that people take to get back to work that increases the cost of claims and this in turn forces up premiums. We help our customers find new careers, however I genuinely worry whether people who have spent their working lives in the public sector will cope with the requirements of private industry ... they could be out of work even longer.”
The independent Office for Budget Responsibility, set up by Mr Osborne, predicts that unemployment will peak this year at 8.1% and it will then fall in each of the next four years to reach 6.1% in 2015. However this is a long way off and a lot of people are going to lose their jobs in the short term.
Accident, sickness and unemployment cover is often bought as Mortgage Payment Protection Insurance by people when they arrange a new Home Loan. Others buy this cover independently as Lifestyle Protection or short term Income Protection Insurance. All pay out if the policyholder is unable to work. The cover can be bought relatively cheaply on-line with premiums for younger people typically about £30 per month to pay out £1500 per month for claims. However, for people in their late forties and above, these premiums can be double. This is not surprising as the Underwriters point out that, from middle age, people struggle to find work following redundancy and suffer from more health issues.
With so much bad news concerning employment, premiums are certain to go up and some Underwriters are already refusing to accept any applications from Civil Servants. Therefore anyone considering protecting themselves with this type of cover might want to arrange it sooner rather than later.