Insurers keen on job-loss covers

Involuntary job losses due to the slowdown would be covered under a comprehensive policy.

The ghosts of 2008 are crawling back on the job street, with the telecom and the investment banking sectors already seeing cuts across the board. However, many insurance companies have sensed an opportunity in this uncertainty and are planning customised and stand alone 'job loss covers'. Such products are popular in developed economies, but now on a standalone basis, the product is set to make its debut in Indian, and the number of enquiries for such products has seen a spurt over the last few months.

Such products that would allow extra financial cushion, without touching one's long-term savings, would help professionals like Ankur Vohra, who was, till recently, a wealth manager in a leading Swiss Bank in Mumbai. Ankur, along with many of his colleagues, was asked to quit, as the organisation decided to re-orient its focus, three years after the team had been put in place.

Currently, job-loss covers in the market are mostly sold as add-on covers with critical illness policies, bundled with home loans or individual loans. Under such covers, insurers would pay three equated monthly installments on any individual loan in case of a job-loss.

Now, however, involuntary job losses due to the slowdown would also be covered under a comprehensive policy, in which payouts would be linked to gross monthly salaries. Even if a company declares insolvency, its employees can individually seek help under a redundancy cover, at least for a few months.

In such a scenario, an insurer can get up to 45-60 per cent of the gross monthly salary, or up to 75 per cent of the net monthly salary, for a period of six months.

Like Ankur, Biswajeet Das has a similar story to share. A Delhi-based telecom-professional, he too, had to quit his job after his organisation decided to merge its mobile, satellite television, fixed line and broadband businesses into a single entity. With a mortgage, a car loan and a new-born to look after, the situation came as a major setback for Biswajeet. “You may get a severance package for three-six months, but it's the uncertainty that kills you,” he quips.

“Over the last six months, queries regarding comprehensive job losses covers have increased,” says T A Ramalingam, head (underwriting), Bajaj Allianz General Insurance.

The company is not only planning an independent cover, but is also exploring ways to widen the scope of its existing cover, currently being offered as an ad-on with home loan products of its channel partners.

“Depending on the customer requirements and the product feasibility, we may consider offering this cover as part of a package policy for other customer segments that have financial relationships with financial institutions. It can cover a certain percentage of the gross monthly salary of the insured person, in case of a covered contingency” Ramalingam adds.

Sanjay Datta, head, customer service (health and motor), ICICI Lombard GIC, says, “The ticket size has increased over the last few months. The queries have also gone up...We are now selling such products, bundled with others. But we are closely watching the market. If the situation demands, we may offer a stand-alone job-loss cover as well.”

Standalone job-loss covers are not uncommon in the West. Such policies—short-term income protection, unemployment cover, full-income protection, mortgage payment protection insurance and payment protection insurance—are based on different needs of the customers.

According to an underwriting head of a private general insurance company, the rise in demand for such policies is predominantly coming from mid-sized companies. Even though he does not favour introducing such a stand-alone product right now, he does not want to miss out on any new business potential.

(Some names have been changed to protect identities)