The market is moving towards offering combined accident, sickness and unemployment mortgage protection and for many providers, premiums have been increasing, by as much as a third in some cases.
If you are lucky enough to have access to a credit insurance provider that still offers redundancy-only cover, you should get in touch with all the clients you have permission to contact for a protection review.
Some firms concerned about the impact of increasing prices might be able to keep their advisers competitive by absorbing some of the cost in a commission sacrifice, or by shopping around for a new provider.
Others who find demand not to be price-elastic may benefit from increased commission. Most providers are now understandably reviewing their position on ASU as a result of market effect on risk statistics.
Halifax is just one example of a provider that recently stopped selling this protection through brokers,
This is not a hoarding of direct income – on the contrary, it is more likely to be a reflection of the increased risk of an extended sales network.
This is an inevitable step for providers with the chances of claims now increasing.
At least if providers are selling cover through their own branch advisers they can have control over the training they receive, as well as the quality of clients they offer it to. Norwich Union also stopped offering unemployment-only cover for consumers as early as last year.
Another typical response to the current climate is to retract from selling the cover to existing mortgage borrowers.
It makes sense that consumers taking redundancy cover when not arranging a mortgage have a higher claim risk as they have proactively gone shopping for it themselves. This could be due to hearing rumours about their job or because they work in an industry suffering from the downturn.
The extended deferment period no longer covers this variance. I remember when we couldn’t get cover for IT consultants whose job had anything to do with the dotcom bust.
The Confederation of British Industry reported last week that unemployment is likely to reach around three million this year.
But with unemployment being one of the main causes for affordability problems in mortgages, for lenders it is no easier. The risk of leaving one’s borrowers unprotected is ultimately a risk to lenders on a much larger scale.
The good news is that ASU is still available, albeit at a price that reflects the new risk levels.
So it’s a good idea to get up to speed on the exclusions, the deferment periods and typical cost of cover offered by your provider.