MSE News: Jobless get walloped when buying insurance

smunchkinp

When i was last unemployed it was cheaper for me to get insurance, and when i found employment is was raised by 25%, Their reasons then was i would be commuting and therefore i would be a greater risk.

Now its the opposite, should i be unemployed, i'd be classed as a higher risk because i'd be job searching/attending interviews etc. ( as i found out while trying to get quotes for my brother)

they're just screwing everyone in every way possible.

oldvicar

One possibility is that the unemployed take greater risks, especially if they have a lower disposable income than when they are employed. For example by not maintaining their car to the same standard as they would if they were employed ... putting off the regular service by a few more weeks might mean missing a safety critical failure; or not changing tyres until they are absolutely worn to the legal limit in order to save money etc. - either could lead to greater risk of accident.

Being involuntarily unemployed can be quite stressful. Maybe this leads to greater chances of depression or chances of distraction whilst driving, and in turn greater claims risk.

The possibilities are legion. We can just hope that the reasons different premiums are set are because of evidence based statistics from the insurers claims records, and not a brutal urge to wallop anyone.

dacouch

Bear in mind that the following types of people normally class themselves as unemployed which has an effect on the genuine unemployeds premiums

Drug Dealers
Gangsters
Professional Criminals eg burgalars etc
Junkies
Alcoholics
Professional Unemployed eg Frank Galagher.

I have seen a ridiculous amount of claims from the customers in the above

mikey72

westv wrote: »

Volunteers normally have to fill in an application form and attend an interview (even if it's informal). They sometimes need CRB checks. I very much doubt you would need any of that if working in your mother in laws garden.
In addition voluntary work can often go under work experience in a CV. Not sure if the garden work can though.

I've had real jobs where I didn't need to do that.

mikey72

dacouch wrote: »

Bear in mind that the following types of people normally class themselves as unemployed which has an effect on the genuine unemployeds premiums

Drug Dealers
Gangsters
Professional Criminals eg burgalars etc
Junkies
Alcoholics
Professional Unemployed eg Frank Galagher.

I have seen a ridiculous amount of claims from the customers in the above

But now as the insurance underwriters are becoming so much more selective, software is becoming so much better, it's unlikely anyone would go from office worker to drug dealer overnight, so a mid term change of details when made redundant, or leaving college and changing from student to unemployed, shouldn't really carry the same loading as as trying to insure your new blacked out BMW in the middle of Birmingham, with no ncd due to bullet damges, for the seventh year unemployed.

dacouch

mikey72 wrote: »

But now as the insurance underwriters are becoming so much more selective, software is becoming so much better, it's unlikely anyone would go from office worker to drug dealer overnight, so a mid term change of details when made redundant, or leaving college and changing from student to unemployed, shouldn't really carry the same loading as as trying to insure your new blacked out BMW in the middle of Birmingham, with no ncd due to bullet damges, for the seventh year unemployed.

I agree mid term they should know a bit more about their client history. However as a new client which most of the examples being used on here to show how much extra it is, the Insurer has no previous knowledge.

The gangsters and non street dealers tend not to drive obvious cars as they want to blend in.

My example was not saying definatively why unemployed pay more, but one of the contributing factors.

As a previous poster has mentioned, the Insurers are paying more out in claims to unemployed overall. If they were as good a risk or better than someone with an average job. Market forces would mean at least one Insurer would not load or offer cheaper premiums to the unemployed and clean up

mikey72

dacouch wrote: »

..................As a previous poster has mentioned, the Insurers are paying more out in claims to unemployed overall. If they were as good a risk or better than someone with an average job. Market forces would mean at least one Insurer would not load or offer cheaper premiums to the unemployed and clean up

No one has said they are paying out more, apart from the insurers. Posters have said they must be paying out more, (and even come up with reasons why they have to pay out more) because they charge more, which is just a justification based on the result. I could equally well say they are charging more because they have decided to, based on the normal person not undergoing a complete change when they're job hunting, and being no greater risk, so it's not justified. Maybe they should put in a very easy mod to the software, asking what your last job was, when you became unemployed, and basing risk on that. A cynic like me would not expect it to happen, as it would reduce profits, others would see it as a way to even more accurately assess the true risk, and expect to see it shortly. The other, age old problem, the news report is based on "insurers say" they are a greater risk. But as ever, onnly insurers can see the data. Some people believe them instantly, others would like a quick glimpse, just to see what the "data"actually contains. Complete lack of transparency from one side, isn't "utmost good faith", I couldn''t tell them I'm got a job, honest, you'll have to trust me, I won't tell you what it is though, but load me in the middle somewhere.

dunstonh

No one has said they are paying out more, apart from the insurers.

They are best placed to know.

I could equally well say they are charging more because they have decided to

Your guess though is irrelevant in the scheme of things.

Maybe they should put in a very easy mod to the software, asking what your last job was, when you became unemployed, and basing risk on that.

The more questions asked, the more it costs to implement and the more likely errors of application will occur. They have to balance costs (implicit and explicit) against the results it will achieve. Remember that the unemployed are a minority and chances are there are not enough to justify having their own questions for the sake of what is likely to be a nominal difference in premium for an even smaller minority.

vaio

I'd have thought the marginal cost of a few extra questions would be minimal and that's before you consider that unemployed are a larger and increasing minority that many groups that do get questions and as for nominal differences, people are reporting increases of 20-50%

SnowMan

A large number of those recording themselves as 'unemployed' for car insurance will be long term unemployed and in receipt of means tested JSA.

Anybody else, in the practical world could put themselves into another category and I suspect most do.

Now ABI guidance may say you should record yourself as 'unemployed' if looking for work but I expect most don't.

You can understand (moral and risk of being uninsured arguments aside) why most don't because I think most, apart from the long term unemployed in receipt of JSA, will feel confident that there will be no problems if they claim and others will feel they 'can't afford' to tell their insurer they have become unemployed or simply overlook to tell their insurer. Someone who had been out of work for 2 months might think if they have an accident (rightly or wrongly) I can say 'I considered myself to be employed although very temporarily out of work', someone not in receipt of JSA might say 'I decided to take a career break' if ever challenged.

So those who are out of work for a short period together with those not in receipt of income based JSA (because of savings or partner income and remembering that contribution based JSA lasts only 6 months) will never tell their 'insurer' that they are 'unemployed'.

So in calculating insurance premiums anyone who has just been made 'unemployed' who actually tells their insurer is going to be lumped together with the group of 'long term unemployed' and will be rated based on experience weighted towards the 'long term unemployed'.

Now clearly that isn't 'fair' to those who are 'honest' and tell their insurer they have just become 'unemployed'

But I suspect it isn't easy for an insurer to differentiate between these two distinct sub-groups without incurring significant expense in checking status at both the application and claim stages and it is difficult to precisely define 'unemployed'. And so it is not that easy for an insurer to come in make the differentiation and offer better rates to the lower risk group.

So the problem is that within the group 'unemployed' there are distinct groups who experience widely different experience but that it is difficult to differentiate between them in a practical workable way.

Lets not forget that premium rating isn't just about identifying groups with different risks and charging accordingly, it is about balancing it against the costs and practical, moral and legal issues of identifying those different risks. One of the biggest risks is how many miles are driven each year, but I suspect insurers have taken the view that what people, put on the form for estimated mileage will often be wrong or non verifiable and so do not take full account of that information. Obviously that may change with tachograph type technology (such as that used by Aviva for young drivers I think I saw?) but at the moment mileage isn't fully taken account of.


Clearly there is an unfairness that needs addressing, but in all honesty I am not sure what the solution is.

You can understand how any one individual insurer wouldn't want to try and make the differentiations of the 'unemployed' group and you can understand that there is a danger if making a universal change across all insurers of making things incredibly complicated.

Perhaps there should be some ABI guidance to say that those people finding themselves temporarily unemployed can record themseves according to their previous occupation together with a help box when applying to tell the 'honest' customers that it is OK to record themselves that way.