Motorists without jobs - Are they a bigger risk?
Cedric Stephens, Contributor
QUESTION: I am an ITC industry specialist. I have a master of science degree in telecommunications, a bachelor's in systems and computer science from a US university, plus about four years' industry experience in North America. I have worked with a government entity in Jamaica since 2011 but we separated a few months ago. I am now in the process of seeking alternative employment. When my motor policy was about to expire a few weeks ago, I decided to see if I could obtain better terms elsewhere. I approached two other insurers. Both of them refused to insure me because of the fact that I am unemployed. As a result, I had to remain with my existing insurer. Can you shed any light on the subject?
- J.C., Kingston 6.
HELPLINE: I am unable to shed any light on your question - after nearly five decades in insurance. I phoned a representative of one of the two insurers you named to get information. She was uncompromising.
Applicants are required to have an occupation, she said. This was in response to the question: Is it your company's policy to reject applications for motor insurance from unemployed persons and, if so, why?
When I pointed out that she had not answered the question, she repeated the earlier statement. I asked to speak with a supervisor. She took my name and telephone number and indicated that I would hear from them shortly.
Since we live in the information age, I do not have to depend solely on the company rep for an answer. MoneySuperMarket - moneysupermarket.com - an entity that is regulated by United Kingdom's Financial Conduct Authority, has a page on its website that is devoted solely to "car insurance for the unemployed".
It was here that I learnt that UK motor insurers discriminate against unemployed persons. If the information that you provided is accurate, that is to say, that the responses of the two insurers you approached is representative of all motor insurers here, perhaps the same thing is happening in Jamaica.
According to MoneySuper-Market: "A recent report from the BBC showed that those without a job are generally forced to pay more for motor insurance cover than those in full-time employment. In fact, BBC research with three brokers found that, while car insurance premiums averaged almost a third more (30 per cent) for those out of work, in some instances, they could be as much as 63 per cent higher."
The reasons given to justify the higher premiums, according to the industry lobby group, The Association of British Insurers (ABI), include the following:
Car insurance companies look at how often a motorist will be using their vehicle, and view those who are out of work as likely to use their care more frequently to travel in search of work. Given that the more you drive, the higher the likelihood of you being involved in an accident, car insurance premiums will be higher;
Insurers also consider the fact that unemployed drivers may be more distracted because of their circumstances, so may drive with less care. They may also be driving along roads that they are not familiar with, and trying to find new addresses to attend job interviews. This may make unemployed drivers more likely to have a bump. Once again, this results in higher costs when it comes to car insurance for the unemployed;
Unemployed individuals may also be viewed by insurers as less likely to maintain their vehicles, as they will have less spare cash to spend keeping their car in tip-top condition. In some cases, they will be viewed as a higher credit risk; and
In addition, insurers say industry figures show there is an increased likelihood of those out of work making a claim - especially among the long-term unemployed. Not only this, but insurers say the long-term unemployed are also more likely to consider making fraudulent claims.
These arguments seem to me to be self-serving. Insurance is based on numbers. Not a single shred of data was supplied by ABI to support its position.
Shopping around was the first bit of advice that MoneySuperMarket recom-mended to unemployed persons in the UK in order to save money. This makes sense there where there are over 40 motor insurers. In Jamaica, the market is more concentrated. There are only eight companies that offer motor insurance. If two of them refuse to insure you, your goose is cooked.
Jamaica's unemployment rate was about 13.4 per cent in March 2014, according to the World Bank. Youth unemployment was more than twice the national rate. My sense is, based on my conversation with a senior company official, that the rep made a mistake. She confused the term employment status with occupation.
Cedric E. Stephens provides independent information and advice about the management of risks and insurance. For free information or counsel, write to: firstname.lastname@example.org