25 January 2010
Mortgage cover can add to unemployment misery
Millions of mortgage borrowers have insurance designed to cover their monthly repayment if they are made redundant – but the media has reported that many policyholders are still seeing their claims rejected.
The cover, which only took off in the past decade, has never been tested as rigorously as now, with unemployment at record highs and borrowers remaining out of work for longer periods.
Between mid-2008 and mid-2009, insurance claims for unemployment doubled. And although insurers say the number of new claims has dropped in the past six months, payouts are being made for an average seven months, up from four in 2008, as claimants struggle to get back into work.
Behind the scenes, insurers are either pulling out of the market or trying to pass on higher costs to policyholders. As reported last April, as the recession gained momentum, many insurers moved to protect their profits by pushing up premiums or cutting back on cover.
The Financial Services Authority acted in October, forcing insurers to refund these increased premiums or reinstate cover. Those refunds are still being processed but insurers promised to keep premiums at existing levels only until this year. With that deadline passed, many are now working on new letters to tell policyholders that premiums will rise in 2010. An increase in cost at the worst possible time is not the only problem with these complex insurance plans; making a successful claim can be difficult.
Sally Bowyer, managing director of leading financial claims company BrunelFranklin.com believes it’s disgraceful that for many the misery of unemployment is being impounded by MPPI providers making claims difficult. “It is unacceptable to burden people with the stress of fighting for what they are entitled to, at an already difficult time. At Brunel Franklin we have the experience of dealing with these situations and the specialist knowledge of knowing what is acceptable.”
