What To Do When Your ASU Premium Increases

With predictions for the UK’s unemployment rate to increase further from current levels of 2.2million to 3million or more, many providers of Accident, Sickness & Unemployment (ASU) insurance, a form of Payment Protection Insurance (PPI) have had to take drastic action.

Already reeling from an increasing surge in claims on their policies, providers have also seen substantially more new policies being taken out as employees seek to try and safeguard their finances before it’s too late.

Neither the number of new claims nor the amount of new business, brought on by the deteriorating market conditions, were built into the original pricing of their products.

The options for these providers, whose aim is to ensure all claims are met, include withdrawing from the market altogether (Progress from Royal Liver), restrict distribution (Halifax withdrew the product from intermediaries) or increase prices.

Existing policy holders will usually be unaffected by an insurance company withdrawing or restricting sales of their product but price hikes generally affect new and existing customers.

But as providers exit the market or limit the distribution of their products, the remaining ones will see increased demand for their policies which adds pressure to their pricing.

So if you receive notice that your premium is due to rise here are a few tips before you panic about another increased outgoing.

Firstly you may have forgotten you even had such a policy. So it is advisable to check you are still eligible to claim under it as perhaps your employment status has changed.

Or you may no longer require it – if your mortgage has been paid off, you have sufficient funds to pay your mortgage for at least 12 months in the event of unemployment or disability are a couple of reasons why you may be able to cancel the policy altogether.

It is worth checking if the policy pays out for 12 or 24 months as the latter were quite popular a few years ago but now largely unavailable so even if you can afford to pay the mortgage for a good number of months, if the policy pays out for two years for each separate successful claim, it may be a policy worth hanging onto.

Many policies offer both unemployment and accident & sickness cover which may have been right at the time but if you have changed jobs or the sick pay policy from your employer has improved you might be able to amend the policy.

If, for example, you would receive 12 months full pay for sickness absence you may be able to dispense with the Accident/Sickness/Disability element of the policy and just retain the unemployment aspect. This would result in a reduction of your premium.

Next it is worth checking if the policy was written without any excess period (the vast majority are) when perhaps now you would have sufficient resource to cover a waiting period of 30, 60, 90 or even 180 days.

This means the policy might have been set up to pay the benefit immediately but if you receive full pay for any period of a month or more, or if you have enough emergency savings, you could elect a waiting period to match your circumstances and reduce your premium accordingly. This works in much the same way as a policy excess on a motor or home insurance policy but it is a number of days as opposed to a monetary amount.

If your mortgage repayments have lowered in line with interest rate reductions you can contact your insurance company to reduce the amount of cover you require and the cost of your premium will reflect this.

The same is also true the other way – it is a good time to check any existing policies will provide sufficient cover in case you need to make a claim. If your mortgage borrowings have increased since you started the policy or if you have left the public sector and/or the sickpay at your current employer is less generous you may need to amend your policy.

Aside from amending an existing policy it can be worth switching providers altogether however it is advisable to take advice from the person who recommended the original policy or seek independent advice from an authorised person or firm.

A bank is likely to only sell you their own product, which is generally overpriced, usually poor value, often unsuitable and you will not receive advice but information only.

Also a new product may have (almost certainly for unemployment cover) an exclusion period making it impossible to claim within a set number of days from the policy inception. Whilst the policy may be better overall it could leave you exposed if you cancelled an existing policy and needed to make a claim in the first month on the new policy only to be turned down.

This is why a professional adviser is able to assist with such matters as they will guide you through the pitfalls and clearly show the benefits of each policy.