|A topsy-turvy world
||[Apr. 14th, 2009|11:44 am]
The insurance industry's argument in today's Independent about the hikes in unemploment cover for mortgages is logical: the risk of joblessness has increased, so, naturally, insurers have had to increase premiums.|
Norwich Union explained insurance to me. All the premiums go into a big pot and then the money is used to pay claims. Explaining the changes to payment protection insurance (PPI), he went on: "Ultimately we need to ensure there's enough money in the pot to pay the claims and in the current climate the number of claims has increased, so we need to increase rates to put more money into the pot."
Motor insurance works like this. According to the Competition Commission, 78 per cent of motor premiums are repaid to policy-holders. So insurers keep 12 per cent.
With PPPi, the situation is reversed. Insurers pay 14 per cent back to policyholders in claims and KEEP 86 PER CENT. Or rather, they give half the money to the banks which sold the rip-off insurance.
So in the good times insurers were making a mint out of PPI and in the bad times, well, you'll just have to pay for those, folks.